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Setting up Your Business to Receive Payments

Before you accept cash, checks and charges from your customers, there are some things you must know.

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While you don't need any special license or permit to start accepting from customers, there are some basics that you should be aware of--especially if you've incorporated your business under a name that's different from your own.

  • Set up a business bank account. If you're operating your business under your own name, you can ask your customers to make their checks payable directly to you and deposit them in your personal checking or savings account. However, if you've incorporated your business and selected a corporate name, you must first set up a business checking account so that you can deposit checks made out to your company.
  • Obtain a tax ID number. To open a business bank account, you will first need to request a tax ID number from the . Once the IRS issues you a number, you will then need to obtain a tax ID number from the state in which you intend to do business. To get a federal tax ID number, you must fill out IRS Form SS-4 (available from the IRS Web site, click on "Forms and Publications") and either mail or fax it to the IRS office indicated in the instructions to Form SS-4. There is no fee. Most IRS offices will issue the number by mail within two to three weeks after they receive your Form SS-4. To obtain your state tax ID form, go to Tax and Accounting Sites Directory and click on "State and Local Tax." The bank will also ask to see your company's articles of incorporation and your corporate seal.
  • Apply for a fictitious name. If you decide to remain a or partnership but choose to do business under another name (known as a DBA), you will have to register your fictitious name with your city, county or state before your bank will let you open a business account. In many states, all you have to do is go to the county offices and pay a registration fee to the county clerk. In other states, you will need to place a notice in a local newspaper. The cost of filing a fictitious name notice ranges from $10 to $100. In most states, corporations don't have to file fictitious names unless the corporations do business under names other than their own.
  • Set up a merchant account. If you want to be able to accept payment by , you will need to set up what is known as a merchant account. To accept , you need three things: a credit card merchant account, a bank account and a way to process . A merchant account allows your customers' payments via Visa, MasterCard, American Express and other cards to be transferred to the bank account you designate. You can expect to pay start-up fees of $50 to $200, plus monthly and per-transaction fees. Monthly statement fees typically range from $4 to $20, and transaction fees typically run 5 to 50 cents per purchase. The discount rate--the percentage that you are charged per transaction--generally varies from 1.5 percent to 3 percent, based on card sales volume, the degree of risk and whether you swipe the customer's card at your store or accept orders online. Check out Google for a list of merchant services providers to compare rates and terms.
  • Check out online payment systems. , the world's largest online payment system, lets consumers send money to anyone with an e-mail address through their credit card or checking account. PayPal can be a cost-effective way to collect payments for companies doing business online. PayPal charges 0.7 to 2.9 percent of the transaction plus 30 cents per order, depending on your company's sales volume. Just add PayPal's "Buy Now" button to your Web site, and your customers can click on the button and pay with their PayPal account. The payment is then processed and sent directly to your merchant account and the customer is returned to your site.

Rosalind Resnick is the founder and CEO of Axxess Business Centers Inc., a storefront consulting firm for start-ups and small businesses. She is a former business and computer journalist who built her Internet company, NetCreations Inc., from a two-person homebased start-up to a public company that generated $58 million in annual sales.

The opinions expressed in this column are those of the author, not of All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

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