Why is using Hotmail for my business such a bad idea?

Right on! Your perception section is exactly what I think of when I see a free email account associated with a business. It also always gives me a feeling of a fly by night operation. I'm far less likely to trust any company that lists their company email as a free email account, regardless of whether I would want to communicate over the Internet or not.

It indicates to me that they don't take their business seriously, not just they aren't taking their online communications seriously.

What I don't understand are those companies that have their own domain, yet still use Hotmail, AOL, and Yahoo e-mail addresses.

I've seen more than one business card with "http://www.example.com" and "ExampleCom@aol.com"

I agree with Ken. If you're connected you can have proper email addresses - usually 5 of them. The only thing I would suggest is that if you think you might change your ISP - which you probably will do sooner or later - use a service like bigfoot.com which redirects your mail to your current mailbox. If you change your ISP just change the redirection address at bigfoot and life goes on as usual. Bigfoot is free but if you go over the free limit it's only $10 per quarter. I wouldn't be without it.

You mentioned the extra expense of having email in a domain that you own.

What hosting service that hosts a web site - even a one pager - does NOT supply email accounts with the basic package? Even the hosting services that are under $10 per month (and there are many) provide at least a few email addresses with the service. I have NEVER seen a hosting company that doesn't.

At Merchant911.org, a free service for on-line merchants to help them protect against credit card fraud, we immediately reject any application that does not use an email within the domain being registered.

And, on a personal level, I will not do business with anyone that has a web site and uses any of the free email services. It's just totally unprofessional.

Funny I have a slightly different perception.
company@hotmail.com (or any other Hotmail/Windows Live International site) and company@yahoo.com look bad. company@msn.com means even worse, because they've paid for the priviledge of Hotmail's poor service, but company@gmail.com doesn't look so bad (to me personally).

Whilst I personally have had no trouble with any Hotmail or Windows Live server, and actually have not known many people who have trouble with those services, I do understand that this could be simply luck. Hotmail's customer service is very often pathetically formal and don't deal with the issue at hand. (They tell you their engineers are working on it... and they can't tell you when it will be fixed)

I have not heard of technial problems with GMail, and certainly email@company.com means that the company is prepared to pay for a reliable email service.

i ignore anything that pertains to business from a @hotmail.com or @yahoo.com
too many thieves located in foreign countries use these accounts to scam millions of Americans every year and i don't want to take chances.

The perception thing is great. I think it is good advice not to have an anyone @hotmail.com but the new live services are superior. In fact I no longer use my gmail acct because I prefer hotmail. On top of that there is email forwarding. Anyone remember that. I get all the emails whoever@scaleprogrammers.com AND i can change in hotmail the FROM to my email address. SO while I do agree about the perception, it is easily remedied.

I agree with the point about perception. Once a business has registered their domain name, they could sign up for Google Apps for Business at no cost. This will give them professional looking email addresses for all of their employees with a great, easy-to-use webmail interface. Best of both worlds!

I agree wholeheartedly with everything above but I'm surprised no one has cautioned another, and equally important reason, for giving a wide berth to Hotmail and Yahoo! They are responsible, without doubt, for the vast majority of spam and, even worse, fraudulent activity via e-mail.

I know several companies who filter out all mail originating from a Hotmail or Yahoo! account. I don't go that far but scrutinise all such mail very carefully. I've also noticed, increasingly, e-mail originating from a bogus address but with a Hotmail or Yahoo! ReplyTo: address. Without exception, these are all engaged in some form of scam.

Finally, a business using a free e-mail service, particularly Hotmail or Yahoo!, is not conveying a professional image.

Bill Chubb is on my wavelength. Don't blanket ignore/delete Hotmail/Yahoo! but check VERY carefully.
Regarding Autoport's comment (April 8) "...too many thieves located in foreign countries ... scam millions of Americans every year and i don't want to take chances."
You're absolutely right not to take chances. But I think you'll find that people in other countries take a very similar but subtly different view, viz. "Too many thieves located in America originate spam/scam emails to billions of the rest of the world."
Evidence/source: http://www.sophos.com/pressoffice/news/articles/2004/12/sa_dirtydozenyear.html.