When you sign up for a standard Paypal account, you are automatically put on the 2.9% + $0.30 transaction fee schedule.  But what they don’t tell you is that you if you frequently receive small amounts (aka micropayments) then you can opt to be put on their Paypal Micropayment fee schedule.

First, let’s compare the transaction fee schedule for the different account types:

Paypal Business/Premier: 2.9% + $0.30

Paypal Micropayment: 5% + $0.05

Anyone with basic algebra skills can solve the equation, $11.90 is the answer.

If you set the two transaction schedule to be the same:

2.9%(x) + $0.30 = 5%(x) + $0.05

x = $11.90

What’s so magical about $11.90?

$11.90 is the transaction amount cutoff for deciding whether you should accept the money via your Business/Premier account, or your Micropayment account.

If the transaction amount is less than $11.90, you are better off sending the transaction to your Paypal Micropayment account.

If the transaction amount is more than $11.90, your fee will be lower if you send the transaction through your Paypal Business/Premier.

Want to verify this?  Just plugin a number into the 2 fee schedules, and you will see why.

Now, it’s quite simple to convert your Business/Premier account to a Micropayment account.  However, before you do I would suggest that you open a new Paypal account, and convert your 2nd account to Micropayment.  This way you have the flexibility of saving on Paypal fee for any transaction amount.

To convert your Paypal account to receive micropayments, simple go to:

http://micropayments.paypal-labs.com/

It will take about 2 business days before your accounts get converted.

I hope this will help you save a bunch on Paypal fees, especially those of you who are running $1 free trial offers – you are talking about the difference between netting $0.679 versus $0.90, and imagine the savings on 1,000 such transactions!

Now a brain teaser: What if the transaction amount is exactly $11.90, should you use your Paypal Business/Premier or Micropayment account to accept the payment?

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I wrote an email to one of my clients outlining the steps on how anyone with a business can incorporate in California (doesn’t matter for formation, LLC, C-Corp, Partnership, etc.) , the Do-It-Yourself way, so you can be sure it’s the cheapest way to incorporate your business.

Now, keep in mind, the following is specific to California, but the steps 1 & 2 of the process of choosing the name should be the same regardless which state you want to incorporate in.

Hi [name un-disclosed],

Here is what I did when I set up my own consulting corp.

Process for choosing a name:

1.  I make sure the .COM of the company name is available first before I even bother performing trademark/business name search.

Go to http://www.wholesalerdomains.com to look up domain names, it’s about $10/year to register the name.  I would also secure the .NET, and .ORG version of it.

2.  Then I make sure the name is not already trademarked.  Go here:

http://tess2.uspto.gov/

3.  Then I perform a search on existing business entities.  Go here:

http://kepler.sos.ca.gov/list.html

Most likely if you pass step 1 (domain name search) and found a name you like, it will usually pass the trademark and existing business name search.

4. Then you can go here:  http://www.sos.ca.gov/business/ to find out all you need to know about what forms/fees you need to self-incorporate your business (yeah, and they make it really easy, too

[...]

Alright, hopefully that’s enough information to get you started – I know, it’s quite a bit, but the good news is that you only need to do it right once

Thanks!
Steve

Step 4 is where it gets me and most people confused.  For my California corporation I chose it to be a CLOSE CORPORATION, and all the state requires is that you file an Article of Incorporation with a $100 check enclosed:

http://www.sos.ca.gov/business/corp/pdf/articles/corp_artsclose.pdf

Here is the Article of Incorporation (download Word Document version here) form that I used, and you are free to use it for your application.  Just make sure you have replaced all the [tags] with your own information.

In the Article of Incorporation form they also suggest that to facilitate the processing of documents mailed to the Sacramento office, a self-addressed envelope and a letter referencing the corporate name as well as your own name, return address and telephone number should also be submitted.

Here is a sample referencing letter (download Word Document version here) that I used, and you are free to use it for your application.  Just make sure you have replaced all the [tags] with your own information.

If you are incorporating other entities, I’ll save you the trouble of treading through the confusing Secretary of State website.  Just choose an appropriate form to file from here:

http://www.sos.ca.gov/business/be/forms.htm

If you are interested in learning more about incorporating in your own state, then I suggest you visit the official USA.gov site.

It’s no wonder incorporation service and kits are available for purchase – because the State’s website don’t make it easier for people!

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