As soon as anyone starts to contribute ideas or designs or code (i.e., intellectual property) to your business concept, you want to make sure that the company (not the individuals) owns that intellectual property. You can accomplish that by having contributors (founders, consultants, etc.) sign a contact that assigns any IP they develop to the company. But to do that, you have to have a company!
So that's at least one reason for needing a legal entity pretty early on. And remember, forming a legal entity too late was one of the Top 10 Legal Mistakes.
A second reason for setting up a legal entity is that you'll want to start building a credit history for your company. To build a credit history, you have to have a legal entity.
A third reason is that you do want to separate your company transactions from your personal transactions. So, for example, you'll want a company checking account so you're not using your personal checking account do to company business. Again, you're company will have to be a legal entity to have a checking account. (For other ideas on early-stage administrative operations see Manage Your Early Stage Startup Operations.)
So - find an attorney with one a law firm that has an emerging-business practice (see Service Providers at OregonStartup.com) and get a legal entity set up!