You did post it - still showing just a few threads down at this moment. In answer to your question, I started as a sole proprietor - to be honest mainly because I really had nothing to lose. Hard work, good decisions, awesome loyal customers and an awesome, capable wife turned that around. Risk of personal loss wasn't all though. There are tax advantages as well. I'm sure the details are different in the US than here in Canada, but the general principles apply.
As for insurance, the turning point was largely the same. We have enough inventory that a fire or major theft loss would be catastrophic. Liability insurance becomes an issue because if a customer is at your place to purchase product, your home owners policy won't cover the slip on the sidewalk or the cut. If your knife snaps inside a moose and causes an injury - or gets used in the commission of an offence or....
In Canada, our insurers don't allow US sales in most policies. They describe the USA as the most litigious society on the planet. We could get permission for up to 5% US sales, but it quadruples our premiums from 1600 to 6400 per year. Of course, you don't have those restrictions, but you may want to consider whether the comment about litigation is fair comment.
What have you got that you're willing to lose?
Rob!