How to Set Up Payment Processing for Your Startup

Accept payments from customers with a reliable, compliant payment processor. Learn how to handle subscriptions, one-time payments, invoicing, and tax compliance from day one.

Before You Start

1
A registered business entity (LLC, C-Corp, etc.)
2
A business bank account
3
A product or service with defined pricing

Step-by-Step Guide

Choose a payment processor based on your business model

Stripe is the developer-first standard with the broadest feature set and best API documentation. Paddle and LemonSqueezy act as Merchant of Record, meaning they handle sales tax, VAT, and compliance for you in exchange for higher fees. If you sell globally and want to avoid tax headaches, go MoR. If you want maximum control and lower fees, go Stripe.

If you are a SaaS company selling to international customers, the Merchant of Record model (Paddle or LemonSqueezy) can save you hundreds of hours on tax compliance. The extra 2-3% in fees is often worth it.

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Set up your account and configure your products

Create your account and complete identity verification (KYC). This typically requires your business EIN, a government ID, and bank details. Then create your products and pricing in the dashboard. Define your plans: free tier, monthly, and annual. Set up pricing in multiple currencies if you serve international customers. Annual plans should offer a 15-20% discount over monthly.

Always create products in test mode first. Use test API keys for development and only switch to live keys when you are ready to accept real payments.

Integrate checkout into your product

For the fastest integration, use a hosted checkout page (Stripe Checkout, Paddle Checkout overlay, or LemonSqueezy checkout). These handle card input, validation, 3D Secure, and mobile optimization out of the box. Pass the customer email and plan ID, redirect to checkout, then handle the success callback. For a more embedded experience, use the provider's JavaScript SDK to render a checkout form inline.

Hosted checkout pages convert better than custom forms because customers trust the familiar Stripe or Paddle interface. Save custom checkout for later when you have the engineering bandwidth.

Set up webhooks to handle subscription lifecycle events

Configure webhook endpoints in your payment provider's dashboard to receive events like subscription_created, payment_succeeded, payment_failed, and subscription_cancelled. Your backend should process these events to update user access, send confirmation emails, and handle failed payment retries. Implement idempotency to handle duplicate webhook deliveries gracefully.

Always verify webhook signatures to prevent fraud. Log every webhook event for debugging. Failed payments are your biggest revenue leak, so implement dunning emails on payment_failed events.

Handle taxes, invoicing, and compliance

If using Stripe, enable Stripe Tax to automatically calculate and collect sales tax and VAT based on customer location. Generate invoices automatically for each payment. Store customer billing details securely (never store raw card numbers). If you are not using a Merchant of Record, register for sales tax in states or countries where you have nexus or obligation.

Set up Stripe's customer portal so users can update their payment method, download invoices, and cancel subscriptions without contacting support. This reduces support volume significantly.

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