Why should one incorporate when doing business in the US? One primary benefit is LIMITED LIABILITY. If you maintain the corporation's legal status properly, and avoid personally guaranteeing the corporation's obligations, your corporation, and not you, would be solely responsible for its own obligations.
The single most important reason people use the corporate form of doing business is to safeguard the personal assets of the owners -- the shareholders (or stockholders) of the corporation -- against potential claims of creditors. Sole proprietors and general partners in a partnership are personally liable for all debts and obligations of the business, such as loans, accounts payable, and defective products.
Stockholders typically are not liable for ordinary debts and obligations.
Other potential benefits of incorporating (even for one-person operations):
Corporate identity: the sense of image, stability, sophistication, credibility, and permanence results from incorporating, no matter if you start with one person or several.
Raising capital: you can issue stock to investors to raise capital which may be more advantageous than borrowing and making interest payments. A corporation can also issue and sell additional stock.
Continuous life: a corporation, can survive its founders, provided it complies with ongoing state and federal paperwork and pays the annual filing fees.
Its shares can be transferred. Stock often can be pledged, sold, given away, used as security, or given as bonuses.
Tax savings: corporations are taxed at a lower rate than individuals. Also, they can own shares in
another corporation and receive corporate dividends 80% tax-free.
While you can incorporate in any U.S. state you wish -- there is no legal requirement that says you have to incorporate in the state where you live and work -- the rule-of-thumb is to incorporate in the state that your company has its principal operations, especially if your business is primarily within a single state.
However, there may be good reasons not to incorporate in your home state (e.g., other states have more flexible corporation laws, more tax benefits, or no corporate income tax).