First, I would let the customers determine WHEN you are ready to pursue a business. This is not a money making enterprise, I can't stress that enough. Generally, you start making knives and show them off. Soon, people start asking you to make a knife or two for them. At that point, check the market, see what your work looks similar to in overall quality and price accordingly. You will probably give away or nearly give away more than a couple knives before you sell anything to anyone who doesn't know you... You have to think like a customer, their first question is always "why buy his knofe when I can get knife x at the same price and its from a known maker?"
Second, your knives need to pass peer review before you start selling them. Post some here, take the abuse, or better yet do what I did, hit up some mastersmiths and let them tear you a new one for a while
When they go "Meh, its alright" you will be ready to sell.
For me, I sold them as a private enterprise for a while as long as the income (which you can report on your 1040 same as a guy who mows a few lawns) as miscellaneous income. When it starts to have a real tax concern, or you start to have items that need to be claimed, depreciated, etc... then form an LLC, S corp, sole proprietorship or whatever applies to your situation. Trust me, find a lawyer who specializes in this stuff. I have a degree in accounting and some of it boggles me from time to time.
Your net losses/expenses are going to offset your net gain for a while, so estimated quarterly tax payments probably won't be needed. From there, however, you need to look at any specific permits or licenses your locale has. Each is specific and unique. Most have a variety of permits that apply to retail establishments (which include a shop of you do point of purchase sales there) or the flea market vendor. Some places you need a resale license if you plan on selling anything, and I mean ANYTHING that was purchased from a distributor for resale. It was taxed differently and it is a concern...
Simply speaking, take it slow. Sell a couple and if it is enough to claim (in my former life the threshold was $200 but was really just an estimate of what wouldn't tick off the feds but the law states ANY income...) then claim it. No offense, but I don't think you will be turning out $1000 pieces just yet. You are new, work slow, and it wouldn't be practical for someone to pay you hourly. My knives take about 100 hours of real work, design to finish, and if I charged hourly even minimum wage with no materials cost, that would be $700+. I won't discuss what I charge here, but suffice it to say it isn't $700
far from it.
I formed a business as I offer a guarantee, and I also have some professional concerns in my day job that need isolation from any venture I have outside of it. From a sales standpoint, I am trying to climb and learn the ABS ladder, and am happy to just keep materials and such coming.
The short answer is really every situation is different. I made a few products back in the day and had whole companies that had no assets, existed only on paper, and lived for a very brief time. Yeah, business law is that weird. Talk to a lawyer if you think you are stepping on federal toes, but truly you will feel the time when you need to have a business plan and incorporate.
(Disclaimer time: I am not a lawyer, this is only one guys opinion and is not meant to be a how to, or anything of the sort. I claim no liability for any actions anyone may take after reading this ..
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