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USTaxAdvising
USTaxAdvising, Accountant
Category: Finance
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We have just setup a company in usa. I already use a paypal

Customer Question

Hi, We have just setup a company in usa. I already use a paypal account in personal name (premier account where business transaction is allowed) . The account was used for 1 year and has existing transactions in it. Can I just upgrade that account into
a business account and start using it? Or should i create a new business account on paypal? There is already a balance of 1000$ in current paypal account and when it gets upgraded as business account, how should we account this existing 1000$ as ?
Submitted: 1 year ago.
Category: Finance
Expert:  USTaxAdvising replied 1 year ago.

Hello,

From a US income tax perspective it would be ideal if the PayPal account was in the name of the business, not in your personal name. It really doesn't matter that the account used to be a personal account. I don't see any issues whatsoever in upgrading a personal account to a business account so long as you don't mix personal transactions once business has started.

The existing $1,000 would be considered "additional paid in capital" you would debit cash and credit shareholders equity to record the contribution the shareholder to the company.

Let me know if something is not clear and I will get back to you as soon as I can.

Best regards,

Customer: replied 1 year ago.
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Customer: replied 1 year ago.
How can we show the paid up capital in accounting? should this also be added in company papers and modify authorized share capital?
Expert:  USTaxAdvising replied 1 year ago.

How can we show the paid up capital in accounting? - You would make journal entry on the date business started to record the $1,000 shareholder contribution. You would Debit the cash account $1,000 and Credit \the authorized share capital account by the same $1,000

should this also be added in company papers and modify authorized share capital? - Basically you would just make this accounting journal entry in your accounting software or records.

Customer: replied 1 year ago.
Should we account this in journal even if the cash does not gets transfered from paypal to bank account?Lets say i have 1000$ in paypal, once i upgrade to business account, i start making payments for business for all 1000$ using paypal.This also would be recorded in normal fashion in ledger right?
Expert:  USTaxAdvising replied 1 year ago.

Correct, you would still record this the journal even though cash does not get transferred to your bank account. Basically the shareholder contributed the cash and the company is using that cash to pay expenses. The company is paying for the expenses out of the Paypal account instead of the it's cash account.

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