I had my first client who backed out of a cake..THE DAY BEFORE IT WAS DUE! (it was already started at this point of course).. and I've decided based on this experience that I need to come up with a contract for birthday/all occasion/specialty cakes. Any tips, samples..??? I'm not sure where to go with this.. I just don't know what to do so that this doesn't happen again! I just kinda do this on the side right now.. I don't have the funds to start a business quite yet.. so I'm not sure what to do.
I think that you can bake from home in Pennsylvania, so it might not cost as much to get licensed as you think.
On the subject of a contract, do a search in the forums for "contract" or "Cake contract" and you should come up with a bunch of threads. Personally, I'd be wary of having people sign contracts if you're not a legal business. I'm not a lawyer, so I don't know if it would hold up in court if it ever came to that, but if someone was mad at you and they had a signed contract, it would be proof that you're operating illegally.
For example, the person who cancelled her order a day before, could basically say to you "so what are you going to do, I'll just turn you in if you don't like it." I don't know if having a contract would be useful for you.
Maybe start a thread asking PA bakers what to do to get licensed, and see what's involved.
Indydebi has a great contract and has always been very willing to share it with anyone who asks (from what I have seen and from my personal experience). If you ask I am certain she will provide you a copy as an example.