I am from India and am offering a set of online tools which are currently free to use. Soon I would like to convert to a freemium model where members can upgrade to a pro account with an annual charge. Is it mandatory by law to incorporate a company before payments can be received from members. I basically do not want to focus my energies towards creating an entity at this point in time without seeing how the paid service fares.
No you don't need to incorporate, nor should you.
You're right in wanting to just get started. You can just do and run credit cards in your own name, whether by PayPal or other intermediary, or whether you use a merchant account and a payment processor.
Jason is right that in the US you don't need to incorporate although you might have to get a business license in your local jurisdiction.
The only real reasons you would want to incorporate is for liability protection (so people suing you can't get at your personal assets which I'm sure is not a problem for you right now) and for tax reasons (which you should not worry about until you're really making money).
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