Nobody's trying to deflate your dreams, but since I've been accused of being a big meanie dream crusher before I'll respond to that.
You asked what the difference between hobby and business is. We answered your question. It looks like you're trying to do things legally, which is 100% in your favor, and which is what MimiFix was referring to (I assume, I won't speak for anyone else but that's what I read her response as.)
Everybody has to start somewhere, but it's better to start with a view of the reality that is the cake industry today, which is an industry that is bloated by illegal home bakeries and people who are underpricing their products because they don't know better. That drags the whole market down, and if you're going to enter the market it's better to know about this kind of stuff ahead of time than to find out about it after you've quit your day job.
If you're going into business you need to look at it as a business, not as a hobby, and that's where most people seem to make their mistake. You're getting your licenses etc, which is good, and you need to realize that when business owners answer a question we're just offering a dose of reality, nobody's trying to crush a dream. I've been in business for almost 20 years and have increased my profits every year, so I know what I'm talking about. I can also recognize good advice and bad advice and advice that's being parroted from an MBA coursebook from people who don't know what they're doing but who want to look like they do. That's the challenge of asking for advice and opinions online, you're going to get a mixed bag. (the people who have answered you so far know what they're doing, by the way.)
So yes, if you're selling product you're running a business. you seem to be getting everything in place before starting down that road, so good for you, that's more than a lot of people do. Don't get offended if people tell you something that you don't like the sound of, take it as something to consider and pay attention to who's saying it and you'll gain a lot of knowledge and maybe avoid some business mistakes.