Suppose I had an idea for a software and I wanted to hire offshore developers/contractors to help me with this idea.
Would it be more efficient/better for me if I incorporated?
Will IP (Intellectual Property) theft be less of an issue? (Do patent lawyers work only for sole proprietors)?
Incorporating will be less efficient for you because it takes money and time that you should spend on building your product.
Patent attorneys work for money, regardless of where it comes from.
The best way to minimize the chance of ip theft is by having a good contract and hiring reputable contractors (e.g. ask for references and talk to their past clients). Contractors who are in habit of stealing from clients shouldn't stay in business for long.
No, it will not matter, because contracts and IP is extremely difficult if not close to impossible to enforce overseas. Much larger companies deal with the issue of having foreign manufacturers build physical products using patented information, then stealing that information to undercut them on price in their own markets.
I'd recommend using a developer or dev shop in the country where you live, therefore a contract would actually be enforceable. Also, labor arbitrage in software development is a bit of a myth. If you're based in the US, check out matchist.com for top devs.
So, there are really only two main reasons to form a separate company instead of operating as a sole proprietor:
(1) You want the protection against personal liability that you can get with a separate company.
(2) You want to share ownership of the company, take investments or make it easy to sell or transfer the company as a going enterprise.
On the downside, setting up and running a separate entity is a nuisance -- depending on where you do it, you may have filings with tax authorities or with the locality where your company is formed. Further, setting up the company and maintaining it isn't free.