We used PayPal same way as Gjcoram - to allow us to accept donations and payments electronically. Once in awhile I'll pay for something ordered online.
We set it up in the organization's name and provided proof of our non-profit status.
However, I did make a mistake not fully understanding the policies. Our biggest fundraiser is a dinner with silent auction, entertainment, and a reverse raffle. We allowed payment for tickets. However, I didn't think abut the reverse raffle being considered a game of chance - which is not allowed for PayPal.
Paypal froze our account and sent us a notice until we took down the ticket site.
Only 3 bought that way, so it wasn't a big deal not to have it for that.
I set up the PayPal account for our PTO to be able to accept credit cards at a big fundraiser. We don't, as a general rule, use PayPal to buy anything, because there is no audit trail (no signature on a check).
It is set up in the PTO's name and connected to the PTO's bank account; we transfer the income from PayPal to the bank. Note that PayPal starts you off with a $500/month limit on transfers, which can be a real problem if you have big fundraisers. It's a nuisance to lift that limit, also: they wanted my personal SSN and would not accept the PTO's EIN, which seemed absurd to me.
I have a quick question - we are a Catholic parochial school but our PTO wants to open a Paypal account to use to make purchases online and at local merchants - does anyone have experience in this, and how did you structure it? Account in PTO's name? In school name? Who holds the card? etc. (we are in process now so any timely response is welcome)