One of the biggest concerns for any business is protecting its principals as well as its assets—and keeping personal and business assets separate is paramount. Forming a legal entity is one of the best ways to create a separation of personal and business assets.
Your personal assets could be at risk if you are sued, without a legal entity (LLC, C-Corp, LLP) in place. Legal entities, when used properly, would form a wall between your personal assets and business assets. If you are using your legal entity correctly, you’d only be subjecting your business assets to business liabilities.