Minimize your personal liability
Sole proprietors and general partners are liable for everything that happens in their business--from unpaid business debts to settling with disgruntled customers. Establishing a business entity with the secretary of state separates you from your business so that if there is a problem, your house and personal bank account isn't on the line.
Conduct your business...well, like a real business
Too many entrepreneurs make the mistake of thinking "small." Instead of running a business, they are trying to make a few extra bucks from a hobby. And if that's your goal, that's fine. But if you want more, you have to think of yourself as a real business and run it accordingly. The first step is determining what form of business entity you should establish.