What structure limits the owners' liabilities for company debts and lawsuits?

The structure that effectively limits the owners' liabilities for company debts and lawsuits is a Limited Liability Corporation (LLC). An LLC combines the flexibility of a partnership with the liability protection of a corporation. This means that, in most cases, the personal assets of the owners (members) are protected from business debts and liabilities. If the LLC faces lawsuits or incurs debt, the members typically only risk their investment in the company, rather than their personal assets.

In contrast, other business structures do not offer the same level of liability protection. A corporation does protect its shareholders from personal liability, but it typically involves more regulatory requirements and formalities. General partnerships and sole proprietorships, however, do not provide any liability protection; in these structures, the owners are personally liable for all debts and obligations of the business, putting their personal assets at risk. Therefore, the LLC structure is particularly advantageous for business owners looking to safeguard their personal finances while still benefiting from the operational flexibility that comes with small business management.