Hi, Ellarose! Getting proper permits/licenses will vary state-to-state and county-to-county, so you'll have to check with your county and state. (I assume you're in the US?) I would check with your county office (like your local tax collector, for example) first and they should be able to point you in the right direction. Once you find the proper office to start the process with, they'll usually steer you to the next office and the next until you're done. You'll also need to register with your state to collect sales tax and to file a fictituous business name, if you're using one.
Here's a thread that touches on things like making your business legal and getting insurance:
viewtopic.php?f=3&t=2612Back when I was selling, I had my insurance through RLI (you have to make less than $5,000/year for their insurance). The Handcrafted Soapmaker's Guild is an option, too. Links to both are in the thread referenced above.
And check out "The Etsy Seller Handbook" for a ton of useful advice about selling on Etsy:
http://www.etsy.com/storque/seller-hand ... ling-2383/Also take a look at the Etsy Help page and the FAQs for more resources:
http://www.etsy.com/help?ref=so_help.
The forums are also helpful:
http://www.etsy.com/forumsBest of luck to you with your shop! Have fun!
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