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You are using Paypal for donations. There have been many horror stories on HN about people doing a donation drive and getting accounts closed by Paypal citing ToS.

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It's definitely a risk. You can actually ask PayPal proactively to review your site to see whether your use of the word 'Donate' is acceptable for them. I did for one of my sites and they were very quick to respond. This still gives you no guarantees that they won't change their minds later, but it does at least give some reassurance about their current thinking.

But isn't he 'selling' something (software) in return for those 'donations'?

From what happened to a game developer in the past (can't remember the name, it was some isometric zombie game), even though the dev was "selling" the game, the button said "donate" and he wasn't a non-profit, so all the money got frozen.

Actually thinking about it, that may have been Google Checkout, but the point still remains.

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