I have a baking business and I also have an edible image printer. I also do frozen buttercream transfer to put designs on cakes. What are the rules such as copyright goes in terms of using images and clip art found online to use as designs on cakes where it be frozen buttercream transfers or edible images?  

AThis link should help: http://en.wikipedia.org/wiki/Clip_art#Image_Rights

If clip art is public domain or royalty-free with commercial use allowed (some RF images only allow personal use) you can copy it. Otherwise you would need to request permission from the author/copyright owner.

Wikimedia Commons is your friend.