You should definitely have some sort of incorporation with a corporate book so that you are protected from liability should anything go wrong. The reasons you incorporate are for 1. liability purposes 2. tax purposes 3. it holds you out as a business much more professionally and will change how you treat the business as well.

If you are looking to fundraise at some point I might suggest a corporation. you are looking at about $2,000 for incorporation, corporate book and veil protection which would include all of your by-laws, minutes, stock issuance, IRS docs, etc. Also prepare yourself to pay an annual LLC or Corp. fee of $800.