It's illegal for a BUSINESS to sell lemonade without a permit. It is not illegal for two girls to sell lemonade without a permit.
No, they are not a business. No it does not matter if they are selling something. A business is an incorporated entity, or a person or individual representing an incorporated entity. They are neither - they are conducting sales
However, the police are empowered to presume corporate status, and have therefore challenged them to refute that presumption. As they have not refuted that presumption, therefore the police can operate against them as if they agree to the presumption that they are an incorporated business.
So all they have to do is refute the presumption through a declaration of their non-corporate status, and challenge the town to prove their presumption of corporate status, and the police will go away and the town will leave them alone.
Right?
(Is the place where I laugh or weep?)
A sole proprietorship is a business.
Alas, sole proprietorships are also businesses, no incorporation necessary.