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I am setting up a drop shipping website and wish to take payments through Paypal but only have a personal account - can I use this or what are the restrictions ?
As you have not added your country to your community profile or said in your post then we can't help at the moment (Paypal varies a lot country to country).
In that case yes.
You can sell on a personal or business account.
The only reason you need a business account is if you are a company or high volume seller or paypal requests you to upgrade for any reason.