It is a jurisdiction specific question. In some places you need license(s) just to operate as a business.<p>In most cases it is better to incorporate and do all the necessary registrations before making sales. But if your product/service doesn't take off as expected then the up-front costs are in vain. Some persons are comfortable with the risks of operating as a sole-trader.
Comply with tax and other laws first. To do it the other way around is, in my opinion, completely unethical. Even ignoring that lawbreaking makes the company literally a criminal organization, a willingness to do that indicates a kind of fundamental flaw that makes the business forever untrustworthy to me.