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The game manual explains the consequences of a low reputation. The lower end may make your evil characters happy BUT if you have any good NPCs they'll leave, plus the expense of purchasing items goes waaaayyyyy up. The Flaming Fist randomly spawns and then you got a real problem because you'll either run or be forced to fight them. The main problem with fighting is that if you kill just one your reputation will drop even further. Eventually no one will sell anything to you, the city populace will be fully hostile, it will be impossible to sleep in Inns, and if I am not mistaken some of the main characters that you need to deal with to complete one chapter to get to the next may be nigh impossible. Do yourself a favor and just get caught stealing. The most you'll lose in reputation is 1 point as long as you don't fight any of the guards.
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