Hi Tricia, you do need to register your business legally in your state. You'll need to pay small business taxes to your state either yearly or quarterly, depending on how they do things. You can get all of this information from your Secretary of State's website. Some states have numbers you can call to ask questions, etc. - this is a great resource if available because I know the forms can seem complicated, etc.
As to your county and city, you'll need to get in touch with your county clerk's office as well as the administrative offices for your city (usually there is a department devoted to small business registration/zoning, etc.) to find out if you are required to register with them as well.
It sounds like you have already gotten in touch with your SOS and they sent you the form names and filing fees you need to send them to register your business so that's a great start.
As to which business entity to register as most VAs are sole proprietors or LLCs but only you can decide which best suits your situation. Try reading through some of the conversations in the
General Legal Issues section of VAF for more information on that.
I hope that helps!