May Business Account use Friends and Family payouts?

[ShotaMegre]

Hi Guys,

What are the Pros and Cons for Business account sending PayPal payments to vendors via Friends and Familty functionality?

Pros overseen:

1. Low commission fees on sending money (even lower than in Mass-payments).

Cons overseen:

1. Not sure if a business in US jurisdiction can legitimately use this feature for business payments. What is the impact of such payouts on annual Tax-forms received from PayPal that we're going to report to IRS?

2. If that kind of transactions can't be qualified as commercial transactions and therefore be shown as general expense, obligations fulfillment to the vendors, making that kind of payments brings a great risk of messing with profits/loss and compliance to IRS-regulations. In this case, there should be some recommendations for business accounts (that are for c-corp for example) not use this payment at all.

3. The number of such payments may be limited on PayPal side. Overusing this feature could bring block on a business account from PayPal despite there is no no information regarding limitations presented on PayPal web-site.

p.s. I'm not concerned about refunds here, feeling Ok about not having PayPal protection at all due to specific business model.

Please share your experience and knowledge on the subject.

[ShotaMegre]

I really need the answer to the question.

Please reply if you know anything on this.

[DPCreations]

Friends/family transfers are NOT for sales/purchases.  Simple.

For sales, send the buyer a PayPal invoice or use the request money option for the buyer to pay for the goods.

[ShotaMegre]

What about the opposite: When a business account should send a payment as friends and family (a company, not a person in the background)?

Could we use this feature to pay salaries to our employees for example?

[DPCreations]

Sending money as salary is payment for the service rendered by the employee.

[ShotaMegre]

So, actually, the business should avoid using sending money to Friends and Family, right?

[DPCreations]

Probably, but I don't know what agreements you have with your recipients and what documentation is legally required for their payments.  Do yo need to withhold any taxes?  Do you need documentation about services rendered to be attached to the payent.

Another problem:  how is this recorded for federal tax reporting as you may need to generate a 1099-K to provide documentation for their records.