Business Type Clarification

[OrbitStorm]

I apologize if this question has been asked and answered before, but evidently my searching abilities are off today!

My wife and I currently own a "project". I don't want to call it a true company, as we haven't registered the name anywhere besides owning a domain and a few websites, and have not obtained a Tax ID yet either.

We focus mostly on freelance work, assisting with web design, branding, etc. We recently decided to upgrade our Premier account to a Business account, both so we can allow our site users to make purchases / "donations" to our account without our names being displayed, and to skip over the account verification every time I make a call to support.

To my point: I'm not 100% certain what to mark our business type as. Technically, we're not a Sole Proprietorship, as she is my partner in everything we do within the business. She invests just as much time and effort into our work, and I always consult her on finances and so forth. So I'm assuming we would want to select Partnership?

Again, I apologize for the likely silliness of the question. If more information is needed, feel free to ask (within reason).

Thank you!

[snowshoe]

We've been there:

The best advice, setup your business first, get it registered with your state, licenced or what ever is required including your tax EIN.   (LLCs work nicely as you can keep your personal life and business life separate.)

Once you have everything setup propely, then establish your PayPal Business Account.  You should also have a business checking account and a business credit card.  Doing all the mentioned suggestions makes setting up your PayPal Business Account a breeze.  Doing things backward or in a hurry only causes additional issues.

You also mentioned donations, something to be aware of as the policies have changed:

In the past this was not an issue as probably 1000's of people currently have donation buttons on their web sites and blogs and they are not nonprofits or registered 501(c)(3) organizations, just individuals.   Things have changed as there's new tax laws to deal with, accounts must be verified, etc.   All US financial institutions such as banks, credit card issues and 3rd party transaction processors such as PayPal are required by law to reasonably verify the identity of the person behind any and all Accounts into which money is collected. 

As stated by PayPal.
"This button is intended for fundraising.   If you are not raising money for a cause, please choose another option.   Nonprofits and or must verify their status to withdraw donations they receive.   Users that are not verified nonprofits must demonstrate how their donations will be used, once they raise more than $10,000."

One easy option is to use a Buy Now item button.   You can code it so an amount can be entered right on the PayPal Screen.   You can also use the the Shipping Override Variables so as not to charge any shipping if you have a shipping method setup for other purposes.   Using a Buy Now type button allows people to give you funds without having a PayPal Account.    Note, you would still pay the standard transaction processing fees, same as selling an item and you must have either a Premier or Business Account, a Personal Account won't work.

Another easy option would be to have people use the send money feature.   Of course they would have to have a PayPal Account and if they send the funds as a gift assuming they don't use a credit card, there would be no fees unless the funds are being sent out of the country.

Last thought, per your post, sounds like you will be dealing in a type of service or intangible items or digital goods.  Make sure that you understand PayPal Polices on these items as there is no buyer or seller protecion.   PayPal works great for physical items that can be shipped, tracked and insured.  When it comes to services, intangible items or digital goods, you end up assuming all risks.

[Kindred1845]

Orbit,

It doesn't matter if you and your wife function "as a partnership" or if you are the only one working in the business. A sole proprietorship is a personally owned business. It's a classification of company that is characterized by basically no real setup or legal protection - essentially you are your business and your business is you. It's not meant to indicate that YOU (the person choosing from the dropdown menu) are the "sole" person involved in the business. That being said, I agree with the prior poster that for purposes of business an LLC in a situation like yours does tend to work very well, although I would set up as a single member LLC because you get all the benefits of the legal protection for your personal assets - but still function for tax and accounting purposes as a sole proprietor (Sch C filer) rather than having to file a partnership tax return each year. You could then also "employ" your wife (or even your kids) for significant tax benefits, just FYI. My advice to you, if you must set the account up now - is to choose sole proprietorship (since that is what you legally are right now) and then do some reasearch into the best tax option for your particular situation - as you can always update and change your information on your business account later if necessary. 

[snowshoe]

We did exactly that, setup a single member LLC, works perfectly and filing taxes is a breeze.