Hi Roland, Regarding our PayPal account. Can I use that to collect contributions for the nonprofit I also work with?
[Edited for clarity and confidentiality.]
You can do anything you’d like, but the true question is whether your good intentions will unintentionally cause more trouble for you than it’s worth.
For clarity, let’s call your day-to-day work your “Primary organization,” and the additional volunteer work is the “Secondary organization”. Also this is not a situation where you have an unbrella business entity and then do business as (DBA) something else. What I’ve written below assumes two separate entities.
PayPal makes it easy to collect payments and donations, especially since you can generate specific buttons to embed on your web pages. Co-mingling funds can get confusing if you aren’t careful. Technically, you can add specific descriptions to the purchase data passed by a PayPal button to indicate a transaction was related to your Secondary organization versus your Primary organization.
Concerns to be aware of:
- Whenever you send people to view a Secondary org’s PayPal hosted page to enter their credit card info, the name and logo of your Primary org may be at the top of page. That’s generally a good thing to help people trust and move forward with entering their payment info. So you’d somehow need to make people aware ahead of time to reduce confusion.
- If people want some sort of documentation of a donation made to the Secondary org for their tax reporting purposes, I don’t know what you’d do in that situation. The donor would normally receive an email receipt of any purchase from PayPal. But your PayPal account is for your Primary org, not the new Secondary org you want to help out. It could cause problems if scrutinized, especially for large dollar amounts. Careful documentation and a clear paper trail would be required. If challenged, how do you explain the money went to the Primary org and then you transferred it to the Secondary org — presumably not under the donor’s name? I recommend that you consult your Accountant to confirm the best way to accomplish this.
Ultimately, I believe that it’s always best to separate funds for each entity. That means create a separate PayPal account for the Secondary org. If it is a registered 501(c)3 you can get a lower transaction fee on each payment/donation processed. The basic amount is:
- 2.2% + $.30 on each transction for 501(c)3 nonprofit.
- 2.9% + $.30 on each transction for business.
(Check PayPal.com for their latest rate structure and discounts for higher transaction volumes.)
It may also be advisable to have a separate bank checking account for the Secondary org. Linking PayPal to a checking account helps you verify that a business/nonprofit is legitimate and makes it easier to transfer money out of the account.
You can learn more by contacting PayPal customer support directly and speaking with your Accountant.
I hope this helps you make an informed decision.