My sister is a single mother and the "father" has not been in the child's life for the past 2 years of his life. My sister wants to give me and my husband custody. How can we make this transaction as smooth as possible?

I would stick to guardianship. To get custody would probably require contacting the father.

If she would give me legal guardianship and the "father" would find out would she have to go to court if he would want visitation or would it me he has to take to court?

It depends. If they give you guardianship, you both would probably be involved if the father wants to take custody or get visitation.