Trying to determine the whether it is necessary to have two different SQL Server Instances, one for a test VM and one for Live VM. Epicor documentation shows that SQL Server can be used between multiple machines, would I risking have issues linking my SQL server which is currently on our Live VM to a Test VM?
Definitely not necessary. You can have Live and Test DBs on the one SQL instance. You can register a remote SQL Server in the admin console, it doesn’t have to be a local SQL instance.
You are, however, going to be putting some extra load on your Live SQL server so that’s something to consider. Also some like to have their Live SQL completely isolated from Test so that testing, maintenance, upgrades etc can all be done without fear of affecting live
What @smurray said. Running an separate instance on the same server will impact performance, as it will consume resources, even when you are not transacting against it.
Having an isolated test environment (including SQL) will prevent any performance impost on your production environment, and gives you the ability to test out Cumulative SQL updates and Service Packs.
If running a separate instance on other hardware/VM is a cost concern, investigate the licensing implications of the use SQL Developer edition on your Test/Development environment.
I would also look at automated deployment and configuration of both. I see too many Oops moving from test to live. Standing up and configuring vms is worth the time investment