One of the main benefits of forming a separate business entity for your business is that, other than for general partnerships, the owners generally enjoy personal liability protection. In most instances, the owners of a business entity are not personally liable for the debts and obligations of the business, unless they have signed a personal guarantee or act illegally, unethically, or irresponsibly.
An owner's liability is normally limited to the amount of money which the owner invested in thebusiness. Usually, only the business entity itself can be held liable for the debts and obligationsof the business.
This personal liability protection is available to owners of C corporations, S corporations, limited liability companies and limited partnerships. The personal liability protection is not available to owners of a sole proprietorship or a general partnership.