When starting a business there are a few legal things to set up prior to credit card processing. It is best to get a business license to separate you and your assets from the business. Along with acquiring a state tax identification numbers and an Employee Identification Number (EIN) so you can file local and federal taxes for your business. Please note that when you create your business name, make sure it is something different then your trade name. This is just a precaution to avoid a possible account set up decline or future shut down of an account. It could be a physical bank, the processing bank, or Paypal. Just be careful not to call it something like Bongs Pipes And More LLC. But first you should have a simple business plan written before anything to clear everything up!
Once you have a plan, business licensing, products to sell, and a website, you would then be ready to worry about processing. Now I would always recommend that you start by setting up a Paypal account for local and all other sales. Don't forget, many people still send money through Paypal or Venmo without having business all set up, yet I would recommend that you commit all the way.
Once you have something like Paypal in place, it will hold you over for the time being (1-2 years). The catch is, they don't want to be dealing with payments for goods such as pipes, sex toys, gambling, and many other things. So they can terminate your account as they please. I have even heard a story from a glass blower about Paypal holding their funds for 6 months because it was a big wholesale transaction that was flagged suspicious. At a trade show I also saw someone having issues with Square after processing a wholesale order and I think it was a similar story.
So the second route to take is to set up an account through a company so you have a credit card processing gateway. They set you up with a merchant account and with a processing bank who will accept your high risk money. A well known company to go to for all of that is Authorize dot net. They will accept payments for your pipes or other bank frowned upon items. You will be paying about $50 a month going directly to them.
Now we go through a third party company called Best Rate Merchant Services to set us up with a slightly cheaper account through Authorize.net. If you go to them, let them know we sent you, but also know that they have 2 year contract that you can only pay your way out of. Other then waiting 2 years, they are good people who try to keep you happy.
The only reason to set up an account like this is if Paypal, Square, or one of the big companies shut you down. The other reason is if you are going to trade shows regularly and will be handling higher transaction amounts that might raise Paypal or other companies flags. You could also be doing well on your website and would like it there just in case. One of the main reasons not to do it though is, you will be paying around $500 a year just to keep a merchant account open. At the end of the day, it is sometimes easiest to sell on Etsy to avoid Processing issues, and dealing with a website. There are so many choices to make, and know you have a little bit of information to make an educated decision about going through with a high risk business.