When starting a business, there are a few legal things to set up before credit card processing. It is best to get a business license to separate us and our assets from the business. A state tax identification number and an Employee Identification Number (EIN) so you can file local and federal taxes for your business. When creating a business name, we may want it different from our trade name as a precaution to avoid a possible account decline or future shut down of an account. It could be a physical bank, the processing bank, or Paypal. Just be careful not to call it something like Bongs Pipes And More LLC. However, we should have a simple business plan written before anything to clear everything up!
Once we have a plan, business licensing, products to sell, and a website, we would be ready to worry about processing. We would recommend that we start by setting up a Paypal account for local and all other sales. Don't forget, people still send money through Paypal or Venmo without having business all set up. Starting small before committing is a great alternative to find out if we will want to continue in this career for years to come.
Once we have something like Paypal in place, it will hold us over for the time being (6 to 12 months). The catch is, most credit card processors do not want to be dealing with payments for goods such as pipes, tobacco, sex toys, gambling, and many other things. So they can terminate our account as they please. We have heard a story from a glassblower about Paypal holding their funds for six months because it was a significant wholesale transaction flagged suspicious. We also saw someone having issues with Square at a trade show after processing a wholesale order, and we believe it was a similar story.
So the second route to take is to set up an account through a company/s, so we have a credit card processing gateway and merchant account. They set us up with a merchant account and a processing bank that will accept our high-risk money. A company to go to for the gateway account is Authorize dot net. They will not accept payments for pipes, or other bank frowned upon items. We will be paying about $25 a month, 10¢ per transaction, and a daily batch fee of 10¢ for any processed payments that day. Because they will not accept high-risk items, we have to go through a third-party merchant for our merchant accounts.
We go through BankCard USA to set us up with a high-risk merchant account that uses Authorize.net gateway. If you go to them, call Sean Smith at (818) 540-3491, and let him know that James P. at Artnsyn sent you. They are good people who keep us happy. To have the merchant account it is about $15 a month. You will also have a variable percentage of each transaction also being deducted between autorize.net and BankCard USA of around 3%.
We have to understand that we are considered high risk when making pipes. That means a unique industry has been created for us, but others who do not want to accommodate us, work against us to make things much harder. We mention this because as of late 2020, Visa and Mastercard have created a new fee for high-risk merchants. This fee is charged yearly at $500 for Visa and $500 for Mastercard. These charges will be billed soon after setting up an account. Visa and Mastercards are trying to make more money somehow and on a group with little to few choices. You could just set up your account to not accept Visa or Mastercard. However, then you would be limited to just Discover and American Express.
The only reason to set up an account like this is if Paypal, Square, or one of the big companies shuts us down. The other reason is if we go to trade shows regularly and handle higher transaction amounts that might raise Paypal or other company's red flags. We could also be doing well on our website and would like a safe and reliable setup that cannot be frozen without notice. We will be paying around $500 a year to keep a merchant account open plus $500 for Visa high-risk registration and $500 for Mastercard high-risk registration. It is sometimes easiest to sell on Etsy until getting banned to avoid processing troubles and dealing with a website. There are so many choices to make. Now we have a little bit of information to make an educated decision about going through a high-risk business.
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