Getting a business license isn’t terribly hard. Most courthouses can tell you how to do it and it usually doesn’t cost much. But there are times when you might want the protection of a corporation instead of a standard business.
If you have any issues where you think there may be liability issues, incorporating your business can certainly protect you from losing your assets. If someone sues you as the owner of a small business, even with a business license, there is the possibility of losing your home, car, dog, anything of value that you may have. A corporation shifts the liability onto the business instead of yourself. With a corporation, it is virtually impossible to lose your personal assets in a lawsuit. Even if you are ridiculously negligent, someone suing has to sue the company- not you.
Is this ethical? In most cases, certainly. I doubt that many people go into business to be negligent or to attract lawsuits. Most people want to avoid the frivolous lawsuits, or the kind that are just money grabs. I was selling safety products from home for awhile, and still do occasionally, and it occurred to me that if one of the products should fail, I would certainly be vulnerable. I didn’t make the safety items. I didn’t design them. I just bought them and resold them, but that alone is enough to be sued in this day and age.
I had already at that point had two people threaten me with lawsuits because their books had not arrived quickly enough. I don’t mean that they were late, just that the people decided that they didn’t want to wait any longer and should sue me. Seriously. While the first time this happened, I understandably thought it was ridiculous; the second time the one threatening me was a lawyer. I looked him up online and found out that he was telling the truth- a lawyer was threatening to sue me because he wanted a paperback novel sooner. Did he sue? No. I think in most cases people threaten lawsuits because they think it will get them free stuff. But I’m not going to chance my family’s home over it.
See also: Keeping Up With Changing Laws and Regulations