Do you do web design on your own?

I'm thinking about starting up a web design business. What I'm wondering is, how exactly would one handle contracts? Especially if you're dealing with the other person entirely over the internet.

Fax? E-Mail? How should the contract even be worded?

Also, if one would start such a business, is there anything special you need to do? Like do you have to go to some sort of government agency to let them know what you're starting a business or do you just tell whoever is doing your taxes that "btw, I have a business"?

I have no clue however if you have a reputation you should be ok. Alternatively work for someone else for a while then open your own business or use an umbrella corporation for contracts. The clients has a contract which you sign (short term work) you forward the details of your umbrella corporation to the client, and they arrange payment etc dealing with taxes, taking a little bit off and pay you. You can always look into setting up yopur own business later on with a customer base and examples of working pages for prospective clients...

Its an option... Otherwise you might need to consult with government people or um lawyers? Legality of contracts, what you need to declare etc...?

Or it might be really simple.. ;)

caveat :This reply is mostly conjecture.
It's best to set up as a company as this gives you limited liability.
The tax man will have to be informed, you'll be charging V.A.T. and your clients will need your vat numbers so they can claim it back (not sure how this works for different countries).
Goverments love people setting up in business so there should be loads of info from various state bodies.

A quick google threw up these tips and samples for contracts:
http://www.ecommerceattorney.com/webcontract.html
http://www.sheppardweb.com/contract.html

As Ecniv said there are companies which take care of all the legal/accounting aspects for a cut of the profit , this might be a good way to get started.

AFAIK under EU law electronic contracts are considered the same as written ones.

On a lighter note, I thought all web designers became extinct after the dot bomb

Some links that you might find useful:

http://www.score.org/

http://www.sba.gov/

I only worked freelance web design, quite a few years ago, and got paid "off of the books". That might be an option until you can establish yourself and build a portfolio.