Smallbizsurvival has a good article on the times when you should NOT be a sole proprietor or partnership including:
Ownership – if you want to bring in a partner
Liability – if you have the type of business where you are more likely to be the target of a lawsuit
Taxes – if you are going to do so well financially that taxes are going to be an issue
Investment – if you want to be able to bring in other people in an ownership position
Selling – if you want to sell the business and make it easy to transfer to new owners
Actually, since the LLC has become so popular, there are few if any reasons not to incorporate or form an LLC with the exception of a few states (California) that have a large yearly tax on these entities ($800 minimum). Learn about incorporating or forming an LLC right now.