Help: PayPal is asking for incorporation details - But I'm not incorporated
Hey all
For MentorCruise I've been using PayPal as payment processor. I'm using it to collect weekly payments for mentees and then paying it out to mentors at the end of the month. PSA: It was a horrible mistake, never use Paypal.
The piece that belongs to me is usually very small - small enough that I don't have to incorporate my business but can declare it as 'side income' on my tax sheet.
Now I got a message from PayPal, asking me for Identity Verification. Put in my ID and my driver's license - no problem. In the next step they wanted to know the date of incorporation and some details. What do I do now? If I can't verify my account, I can't pay my mentors and it will destroy my app!
I've already tried to reach them but they take so damn long and from my previous experience are NEVER able to help.
Normally, PayPal Business accounts recognise the following types of business entity:
sole trader
partnership
limited company
The names may differ slightly from country to country but the concepts tend to be very similar.
As far as I can tell, in Switzerland you need to register as a sole proprietor (https://startups.ch/en/inform/details/soleproprietorship/).
This then becomes your business name and the date of incorporation will be your registration date. If the Swiss tax authorities follow similar procedures to the UK ones, they will also issue you a tax reference of some sort which is distinct from the tac reference you have as a citizen. In other words, both your business and you will have your own tax references.
(For UK readers, this is known as a UTR or Unique Tax Reference.)
Is there a drop-down in the Swiss version of the registration page which lists the different types of business entity PayPal will accept?
Section 1.3 of https://www.paypalobjects.com/webstatic/de_DE/downloads/PayPal-Geschaeftskonto-Anmeldung-CH.pdf seems to be asking what sort of business entity you are.
Unfortunately, I can't read German and can't copy and paste the drop-down text from the image in the file into Google Translate for you.
(I have no idea whether you are a German, French or Italian speaker, by the way, but the Swiss PayPal site seems to assume everyone speaks German!)
I got to the PDF from here: https://www.paypal.com/ch/webapps/mpp/merchant
There's a link at the bottom called "How to open a business account".
Thanks a lot for your answer.
Looks like it's time to open a sole proprietor corporation :)
It's not a bad idea to start a corporation (or an LLC in the US) for side projects (can even have one as a parent company of all your side projects), as it protects you legally. If someone wanted to take legal action against your company, it wouldn't affect your assets, only the ones of your company.
Unfortunaltely, not so true: It's been proven many times in the past that having an LLC doesn't protect you much as an individual, in the US that is...it's just like a tiny firewall in front of your gigabit line, that you haven't updated since 1995.
In Switzerland I'd have to set up a sole proprietorship which doesn't protect me at all. A LLC requires $20k of capital here.
Maybe in the future
You could consider incorporating in Estonia, where the capital requirement is only €2500 and can be deferred (you don't have to come up with the case on day one). (Being Estonian, I should warn you, does come with some downsides, such as Stripe (and other payment providers) not supporting Eastern Europe. Research carefully first.)
Which reminds me: take out some form of professional indemnity insurance which will protect you against legal suits - and make sure your terms and conditions restrict what you are liable for.
I would strongly advise seeking out a business insurance broker to 7nderstand the nature of your particular risks.
Not always entirely true!
There are occasions when the corporate veil can be pierced.
The rules differ markedly from country to country but the following Wikipedia entry offers a nice intro into the subject.
https://www.wikiwand.com/en/Piercing_the_corporate_veil