The rise in popularity of the subscription monetization model means that parties to a website sale are increasingly confronted with the challenge of transferring existing paid subscribers from seller to buyer.
Are PayPal subscriptions transferable?
Transferring Paypal subscriptions from one account to another is not possible. However, transferring a PayPal account from one party to another is sometimes possible, which in effect, also sometimes makes transferring an underlying subscriber base possible.
Which PayPal accounts are transferable?
Instead of asking “are PayPal subscriptions transferable?”, we need to know “What type of PayPal accounts are transferable?”
There are two primary types of PayPal accounts:
|Account Type||Account Description||Accounts transferable?|
|PayPal for Individuals||For individuals who buy and sell online on their own behalf.||Never|
|PayPal for Businesses||For merchants who buy and sell online using a company name.||Sometimes|
PayPal For Individuals: Subscriptions cannot be transferred
Unfortunately, if you are processing subscription payments with a PayPal for individuals account (or Personal PayPal account), the subscriptions are non-transferable, no matter the circumstances. The reason being that with PayPal for Individuals, each account is tied to an individual. Thus, when a subscriber enters into a recurring agreement to pay a PayPal for Individuals account, they are agreeing to pay that individual. PayPal cannot legally allow that individual to then sell/transfer those agreements to another individual or entity.
If you find yourself in a situation where you want to sell a website, but the subscriptions are held in a personal PayPal account, the business may be valued lower than expected by potential buyers. The reason for this is that in order for a business buyer to take control of the subscriber base, all subscribers would need to resubscribe to make recurring payments to an alternative PayPal account controlled by the business buyer. Because this will lead to user churn, the buyer will value the business less than they otherwise would have if all subscribers could have been transferred without churn.
Clearly, churn can greatly influence the value of your website. For example, if you decide to sell your website which is monetized exclusively by 100 subscribers, but it is expected that user churn upon re-subscribe will lead to a 50% loss in subscribers, the business would effectively lose 50% of its value. This might not seem like much, but imagine a business worth $100,000 that is now worth just $50,000 – all because the owner decided to charge subscription payments on a PayPal for Individuals account.
Can I transfer PayPal subscriptions with a Business Account?
Consider Jeff. Jeff owns a dating site with 100 recurring subscribers. Jeff sells his website to Tom on Flippa. As Jeff begins transferring the assets to Tom they’re faced with the challenge of transferring the recurring subscription payments. We already know that if Jeff processes the existing subscription payments with a PayPal for Individuals account he won’t be able to transfer this account (or the underlying subscriptions) and Tom will have no choice but to ask all subscribers to re-subscribe under another account he controls. However, if Jeff has a PayPal Business Account it’s possible he could transfer this account and the underlying subscriber base to Tom, assuming certain criteria are met.
How to transfer a PayPal Business Account?
In order to transfer a PayPal Business Account, you need to change the contact name on the account. This contact name is not the name of the business, but rather, the name of the business operator. Taking the above example, the parties would need to submit a name change request, asking that the business operator name be changed from Jeff to Tom. The one major requirement is that both parties must be located in the same country, otherwise PayPal will not honor the request.
If both parties are located in the same country the following steps can be taken to request a name change:
- Write a formal letter requesting the contact name change for your business account.
- Identify the previous name on the account, and the name that you want added.
- Provide a copy of a valid photo ID for the new contact person.
- Acceptable forms of ID include a driver’s license, passport, or any other form of government-issued photo ID that contains the individual’s date of birth (DOB.)
- Provide proof of Social Security Number for the new contact person.
- Acceptable forms of proof include a copy of a social security card, recent pay stubs, w-2, or official tax statements that show the individual’s complete social security number.
- Provide proof of business formation including the business name & new contact name:
- Acceptable forms of proof include Articles of Incorporation, an active business license, or any official business documents filed in the business’s home state.
- Provide a bank statement for the bank account tied to the PayPal account.
- If the bank statement does not display the name of business and the new contact person, a Name Change Authorization Letter is also required.
- The Name Change Authorization Letter needs to contain a letterhead, company logo, and signature of an officially designated company representative.
Once you have the information above and are ready to request the name change, take the following steps:
- Log into your PayPal Business Account
- Navigate to the Business Profile Icon and select Profile and Settings
- Select My Business Info
- Select Update Business Information
- Change the Business Name
For security purposes PayPal won’t allow you to submit the supporting documents by email, so you can either submit them by uploading them or faxing them. If you prefer fax, you can fax the supporting documents to 402-537-5731, just be sure to include a cover page with your name, and a description of the request.
At the end of the day, the decision to process subscriptions via PayPal can have dire consequences when it comes time to sell your website and transfer these subscriptions to a new owner. Though I’ve done my best to outline the general considerations of this process above, I would always recommend reaching out and contacting PayPal directly to get the most up-to-date information about transferring PayPal subscriptions and accounts.