This is a bit scary for me as I've had my Paypal account since 2001; it was actually started out originally connected to my Mom's bank account when I was in high school. I've heard some very worrying things over the years about how Paypal can suddenly freeze accounts for what they arbitrarily deem as "suspicious activity" so I try not to change anything about how my account is handled. Kind of an "if it ain't broke, don't fix it" thing. Neither Youtube or Patreon requires this business account stuff, either, so forgive me if I keep my distance for the time being. I know I'm being a bit paranoid, but this sounds like a big change for a Paypal account that's very old and basically gets used more than a bank account.
We’re working with our PayPal rep to look if we can remove the business account requirement. Hopefully I’ll have an update about that soon.
Do keep in mind that if you receive payouts from itch.io then you do not need a business account, the payouts system uses something different. (It would be similar to how you get paid by Patreon and YouTube most likely)
This topic is specifically for those who wish to sell directly from their PayPal account, where they are the merchant of record. If you’re already selling out of your PayPal account directly then you would be responsible for reporting income tax, and PayPal would be required to generate documents, so I would imagine PayPal already has your tax information.
Well, I'm speaking from the perspective of checking my dashboard here on Itch and it telling me I need to reconnect my Paypal, and doing so starts the process of converting me over to a business account. I do have a couple things listed on Itch as "Pay What You Want," but to date they've barely made more than $100 in, gosh, what, three years? Four? But I do hope to change that some day.