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Generally speaking, "business" is not the same as "corporation." If you are an individual seller, you are running a business as an individual seller. As far as this situation, I just went through the paypal reconnection on itch.io and upgraded my paypal as required to a business account, and so far I haven't seen any issues. When I answered the three questions on the upgrade page, I answered "sole proprietorship" for the type of business organization https://en.wikipedia.org/wiki/Sole_proprietorship

But when I upgrade to a business user, he needs me to provide a copy of the business license, I do n’t have that kind of thing
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Who is "he?" Paypal? I didn't see a requirement for a business license when I upgraded my paypal account.

However, I am in the US. I don't know if there are differerent requirements in other countries.