Stripe vs PayPal vs Paddle: Fee Breakdown (2026)

The payment processor determines how money enters the business. For a cross-border solo founder operating a US LLC from outside the US, selling digital products or services to customers across jurisdictions, the choice is not primarily about transaction fees. It is about who handles tax compliance, who owns the customer billing relationship, and what happens when the money needs to move from the processor to a bank account in a country different from where the business is registered.

Stripe, PayPal, and Paddle solve different problems. This article maps the concrete costs, tax handling implications, and platform dependency risk of each option.

For banking comparisons (where the money lands after processing), see Mercury vs Wise vs Relay. For accounting software that reconciles these transactions, see Xero vs QuickBooks for International LLC Owners.

The fundamental distinction: payment processor vs merchant of record

Before comparing fees, the structural difference matters:

Stripe and PayPal are payment processors. You are the merchant. The customer's invoice shows your company name. You are responsible for calculating, collecting, and remitting sales tax, VAT, and GST in every jurisdiction where you have tax obligations. You own the customer billing relationship.

Paddle is a Merchant of Record (MoR). Paddle is the merchant. The customer's invoice shows "Paddle" (or a Paddle entity), not your company name. Paddle calculates, collects, files, and remits all consumption taxes globally. You receive a net payout. You do not own the customer billing relationship — Paddle does.

This distinction affects everything: pricing, tax compliance burden, customer relationship ownership, and switching costs.

Fee comparison

The headline rates are misleading for cross-border operations. A US-based founder selling to US customers in USD sees the advertised rate. A non-resident LLC owner selling globally sees a different effective rate.

Effective rate for a typical cross-border transaction

A non-resident LLC owner selling a $100 digital product to a customer in Germany:

The inversion: Paddle's 5% + $0.50 — the highest headline rate — becomes the lowest effective rate for international transactions when tax handling, currency conversion, and chargeback protection are included. PayPal's rate, which appears competitive for domestic US transactions, compounds to the highest effective cost for cross-border sales due to the FX markup.

Tax handling: the real differentiator

For a cross-border solo founder selling digital products globally, consumption tax compliance is the highest-friction structural obligation. The EU VAT rules alone require registration and filing if digital sales to EU consumers exceed EUR 10,000 annually.

The compliance cliff: With Stripe, tax calculation is available but filing remains the founder's responsibility. For a solo founder selling to customers in 15+ countries, this means managing tax registrations, filing calendars, and remittances across multiple jurisdictions — or paying for a service like Avalara ($300-500/yr) to handle it. With PayPal, no tax support exists at any price point.

With Paddle, the entire tax compliance chain is eliminated. Paddle is the legal seller. If a tax authority has questions, they contact Paddle, not you.

Account requirements for non-US residents

The banking constraint: Stripe requires a US bank account with domestic routing and account numbers for a US LLC. This means non-resident founders need Mercury, Relay, or a Wise Business USD account (which provides US routing numbers). International-only bank accounts using SWIFT/IBAN do not work for US Stripe accounts. See Mercury vs Wise vs Relay for the banking structural analysis.

Paddle sidesteps this entirely. As MoR, Paddle pays out to bank accounts in 200+ countries in USD, EUR, or GBP. The banking layer is decoupled from the payment processing layer.

Multi-currency and payout structure

The payout gap: Stripe's daily payouts are a cash flow advantage, but only if the money stays in USD in a US bank. If the founder needs money in a non-USD currency, the flow is: Stripe → US bank (Mercury/Wise) → currency conversion → local bank. Each step adds time and cost. Paddle's monthly payout schedule is slower but arrives in the founder's chosen currency directly.

Platform dependency and switching risk

This is where the trade-offs become material.

The MoR trade-off: Paddle eliminates tax compliance and international banking friction. The cost is that Paddle owns the billing relationship with every customer. If Paddle changes pricing, changes policies, or if the founder outgrows Paddle's feature set, migrating away requires every customer to actively re-subscribe. For a SaaS with 500 subscribers, this is a material business risk.

Stripe's approach leaves more work with the founder but preserves optionality. The billing relationship is yours. Switching processors is a technical project, not a customer re-acquisition project.

Subscription and recurring billing

Lemon Squeezy: the fourth option

Lemon Squeezy operates the same Merchant of Record model as Paddle, with similar pricing: 5% + $0.50 per transaction (+1.5% for international). Acquired by Stripe in 2024, it currently operates independently.

For a solo founder selling a single digital product or simple SaaS, Lemon Squeezy offers the same MoR benefits as Paddle with a simpler interface. For more complex billing needs, Paddle's feature set is deeper.

The structural decision

The choice maps to specific characteristics of the business:

What the payment processor does not solve

Regardless of which processor handles payment collection, the cross-border LLC owner still faces:

• Entity structure decisions — Which jurisdiction, which entity type, which registered agent. See Stripe Atlas vs Firstbase vs Doola and Delaware vs Wyoming LLC.
• Banking infrastructure — Where the money sits between collection and use. See Mercury vs Wise vs Relay.
• Form 5472 filing — Every foreign-owned single-member LLC is required to file annually with the IRS, regardless of payment processor. $25,000 penalty for non-filing.
• Tax residency — The payment processor does not determine which jurisdiction taxes the founder's income. See Digital Nomad Tax Residency Guide.

The payment processor is one layer of the operational stack. It sits between the customer and the bank account. How it interacts with the accounting layer, the tax compliance layer, and the entity structure creates structural implications that compound. For a full mapping of these interactions across Money, Entity, Tax, and Accountability dimensions, see the free risk screening tool.

Frequently asked questions

Can I use Stripe with a US LLC if I live outside the United States?

Yes. Stripe accepts US LLCs owned by non-residents. You need an EIN, an ITIN or SSN for the beneficial owner, and a US bank account with domestic routing numbers. Mercury and Wise Business both provide US routing numbers that work with Stripe.

What is a Merchant of Record and why does it matter for tax compliance?

A Merchant of Record (MoR) is the legal seller in a transaction. When Paddle acts as MoR, Paddle (not your company) is the entity that collects payment from the customer, appears on the customer's credit card statement, and is responsible for calculating, collecting, and remitting all applicable sales taxes, VAT, and GST globally. This eliminates the founder's obligation to register for and file consumption taxes in multiple jurisdictions.

Is PayPal safe for cross-border founders?

PayPal has well-documented patterns of account freezes and 180-day fund holds, particularly affecting international sellers. While many founders use PayPal without issues, the platform's opaque dispute resolution process and aggressive limitation policies create structural risk. For cross-border operations where PayPal is the primary payment processor, a single account freeze can disrupt cash flow for six months. Many founders use PayPal as a secondary payment option alongside Stripe rather than as the primary processor.

If Paddle owns the customer relationship, can I switch to Stripe later?

Switching from Paddle to Stripe requires every active subscriber to re-enter payment details through a new checkout flow. Paddle's MoR model means existing subscriptions are legally contracts between the customer and Paddle, not between the customer and your company. For a SaaS with recurring subscribers, this migration creates churn risk. The trade-off is worth understanding before choosing a MoR: the compliance benefit during operation comes with a switching cost if the arrangement needs to change.

Does Lemon Squeezy still operate independently after the Stripe acquisition?

As of early 2026, Lemon Squeezy continues to operate as an independent product with its own pricing, dashboard, and MoR infrastructure. The long-term strategic direction under Stripe ownership is not publicly clarified. Founders building on Lemon Squeezy accept the uncertainty that the platform's features, pricing, or independence may change as Stripe integrates the acquisition.

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Key Takeaways

• Paddle's 5% + $0.50 headline rate becomes the lowest effective cost for international transactions once tax handling, FX conversion, and chargeback protection are factored in.
• PayPal's domestic rates appear competitive, but compound to roughly 9% effective cost on cross-border sales due to FX markups and missing tax infrastructure.
• The Merchant of Record model (Paddle, Lemon Squeezy) eliminates consumption tax compliance entirely, but transfers ownership of the customer billing relationship to the MoR provider.
• Stripe preserves full control over the billing relationship and customer data. Switching away from Stripe is a technical project; switching away from Paddle is a customer re-acquisition project.
• Non-resident LLC owners using Stripe need a US bank account with domestic routing numbers (Mercury, Relay, or Wise Business). Paddle has no such requirement.

Related Reading

• Mercury vs Wise vs Relay: Best Banking for Cross-Border Founders
• Wise vs Payoneer vs Mercury: Multi-Currency Comparison
• Xero vs QuickBooks for International LLC Owners
• Stripe Atlas vs Firstbase vs Doola: Pricing Comparison
• Delaware vs Wyoming LLC for Non-Residents
• FBAR for Digital Nomads: The $10K Threshold Trap
• How Payment Freezes Actually Work
• Your Stripe Dashboard Is Not a Structure
• Digital Nomad Tax Residency Guide

References

• Stripe Pricing — Domestic and international card processing fees
• Stripe Tax — Automated tax calculation add-on
• Stripe Billing — Subscription and recurring payment management
• PayPal Business Fees — Fee schedule for merchants
• PayPal User Agreement — Fund hold and limitation policies
• Paddle Pricing — Merchant of Record fee structure
• Lemon Squeezy — MoR platform for digital products
• Lemon Squeezy: Merchant of Record — How MoR tax handling works
• EU VAT One Stop Shop — EU digital services VAT rules
• IRS: Form 5472 — Information return for foreign-owned US LLCs
• Avalara — Automated tax compliance platform
• TaxJar — Sales tax automation
• Mercury — US business banking for startups
• Wise Business — Multi-currency business account
• Relay — US business banking for small businesses
• ProfitWell (Paddle Retain) — Subscription analytics and churn reduction

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