Which entity type offers the most protection against personal liability for business debts?

A corporation offers the most protection against personal liability for business debts because it is a separate legal entity from its owners (shareholders). This separation means that the personal assets of the shareholders are generally shielded from any liabilities or debts incurred by the corporation. If the corporation faces a lawsuit or becomes insolvent, creditors typically cannot pursue the personal assets of the shareholders for the corporation's debts.

In contrast, sole proprietorships and general partnerships do not provide this level of protection. Owners of sole proprietorships are personally liable for all business debts, and in general partnerships, each partner also assumes personal liability for the debts and obligations of the business, meaning personal assets could be at risk.

Limited partnerships do offer some liability protection to limited partners, but general partners in a limited partnership remain personally liable for business debts. Therefore, while limited partnerships provide some degree of liability protection, a corporation stands out as the entity type that effectively shields its owners’ personal assets from business liabilities.