There are two topics I would like to have comments on:
1 - How do I indemnify myself against lawsuits?.
2 - What is the best legal structure to create for tax purposes?
And no, I am not in the business of buying or selling hostnames for profit.
It's hard to comment on this as you don't tell us what your product/service will be. In any case, YES, you would want to be a corporation (LLC for individuals) Inc. or Corp. for multiple owners. Check with your accountant and lawyer if you have one currently. Your state can also shed some light on that subject for you.
The BEST start to protecting yourself is be true to what your selling/doing and always explain everything to your customers as plainly and simply as possible. Offer your terms in writing or via posting it on your site. Lawsuits usually stem from a misunderstanding of the scope of work OR someone just trying to get something for nothing by bullying you about their bill or your services. If you've done an excellent job providing your product or service--then don't buckle under to this tactic. Remain firm and professional.
Also join your state or local Better Business Bureau. There are many benefits to this. They can often be your best adversary when someone pulls some "tacky tactics".
Tell us more about what you actually want to do as your business.