Hey there! It's my pleasure to have found this opportunity to ask some questions that I have! I have been searching for ways to learn more to no avail. They are of delicate nature. I can think of very few that would find my ideas appropriate let alone have any educated answers for me.

While you would benefit from finding a way to report the income and pay taxed -- in the sense that you can then take that money and invest it without raising any questions about the source -- I think you might want to stay away from setting up a formal business entity. That might open the door to some rather nasty legal problems like money laundering, false statements to governments, and the like.

I'm no expert. But Qs like yours have come up on TER before.  
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I agree with Jensen about declaring income and paying taxes.  The government now tracks the movement of large amounts of cash ($10,000 and above) and some institutions even flag and voluntarily report suspicious activity at lower thresholds ($5,000). Let's suppose you accumulate a big bag of undeclared cash money and you want to make any major purchase: car, house, condo.  That paperwork may trigger an investigation into how someone with zero or poverty level income suddenly came up with 100 grand in cash.  Now the gov comes in and wants to collect past taxes and penalties on that $100k of mystery money.
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In order to have a way to properly report income, Providers have mentioned a few ways that they do that. A common recommendation is to find a Provider-friendly accountant who can help with legal compliance and setting up accounts and making timely payments of what is required (Social Security, quarterly withholding, etc.).  Depending on your location, there may be Providers in your area with recommendations.  
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Some Providers have mentioned that they do have businesses to help them with compliance. I don't remember all of the categories, but "consulting" could be one. I think one Provider said she has a "party planning" business. (Hmm ... that would normally entail some costs, I think: advertising, catering bills, hall rentals, ... balloons other than long, slender "balloons" with a reservoir tip.  Well, I think she had it worked out.)  
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Hopefully, you'll get some more As and some better ideas. But it can be done.
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And, as Jensen said, check out Legal, too.
 

Thank you so much

http://www.companiontax.com/

Dewey, Cheetum, and Howe. 😀
Happy Holidays.

Sess, Poole, and Drain?
Neal Down and Jack Mioff?

Having a business entity only opens the doors to those problems if and only if you do things like "money laundering, and making false statements to the government and the like"

It's not the IRS that would be the problem if for any reason the government decided to go after you for setting up a business to move money from a criminal activity into the legitimate world to make it clean. Moreover, I cannot think of any local or state business licensing/registration that doesn't note that the owner is not engaging in some illegal activities. When filling for your business license you have to specify a purpose. The one my lawyer used was "Any legal activity." Clearly she will not be approved if she were to say "Sale of sex acts." But if she puts something else down that is fraud and would also fall broadly under the money laundering definition.

Then my advice for the OP is to open a business as a poultry farmer.

and an actual "business license" is not a requirement for legitimizing your income, which is a far cry from money laundering. Which is just one of the reasons I mentioned it's obvious that you are NOT a person in business for yourself. Please don't take offense, there are a LOT of subjects where you are more than qualified to give advice, this is just not one of them and I can't let bad advice on a topic this important go unchallenged the same way as I have had to correct a LOT of posts on the Legal Board over the years.

Yours is by far the best advice given so far on this thread.  

GaG the point was there are a number of businesses that someone might form (LLC was mentioned which make zero sense to me as if you get to the point you need the liability protecting it is very likely the nature of the income source comes out and the liability is not gone). Depending on where she is she might not need to even bother with a DBA or a separate bank account -- she just needs good accounting to separate the business spend from the personal spend. It's not like any of the authorities the person and the business from a tax or income perspective for what she will do.

but suffice it to say, you are WRONG.  

I also wanted to thank Jennie for chiming in. My first reply to the OP mentioned that, in the past, other Providers have offered advice about how to set up and operate their businesses and plan for the future. Best practices do change over time, even year to year, depending on the tax codes.  
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Brandi Alexandre was a porn star in the 1980s-90s and she used to post to the internet usegroup rec.arts.movies.erotica [rame].  Porn is legal but payment to starlets was often in cash. Not every starlet reported their cash income.  Brandi's father was a CPA and did her taxes for her.  She reported everything and took as many legit deductions as possible. I seem to recall that her lingerie was a deductible business expense. "A case of panties" was a business expense because she would sell them to her fans = reportable income.  
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I was more of a strip club guy than a TER guy in the 90s. I remember strippers panicking as new laws were kicking in. Some had been dancing for years without reporting their cash incomes and, pretty soon, they were going to have to pay the piper back taxes and penalties on wads of cash that they would not be able to spend except in dribs and drabs. I forget: Did the IRS offer an amnesty period to let those with wads of cash income file with reduced or zero penalties? Don't count on that in the future.
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Depending on the business, income and expenses should be reasonable to avoid raising IRS flags. Consulting can vary a lot. A party planning business should have a record of the common expenses or the IRS might get suspicious.  
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Thanks, again, Jennie, for posting about your experiences and methods. Have a Happy and Successful New Year!

...But you don’t know what you’re talking about with respect to a sole proprietor pass-through entity and possible legal liability in this industry and accounting issues.