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Q-A Limitation of Liability
Is it important to limit the owners' liability for debts and obligations of the entity?

While introducing/limiting liability for entity debts we wish





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[Liability/Management Block] Rule #1:
= "LLC"
IF
IsTrue: [Who will be responsible for the debts and obligations of the business?] Is "keep members/shareholders with limited liability"
IsTrue: [Who will manage the entity] Is "leave it open to operating agreement specifications"


A characteristic of a sole proprietorship is that the indvidual owner does not act through an entity and thus is personally responsible for all of the liabilities of the business. All of the owners, or partners, of a general partnerhip are similarly each jointly and severally liable for the debts of the partnership's business. Typically, only businesses that have low liability exposure (i.e. passive investing) or regulatory restrictions (professional service firms) will conduct their operations through the general partnership form.
A limited partnership is a partnership in which the "limited partners" are not personally liable (absent some contrary obligation in the partnership agreement or other contractual undertaking. One or more "general partners" of a limited partnership are, however, personally responsible for the debts of the limited partnership. Often, when the limited partnership form of business is used, the general partner itself will be organized as an entity to limit the liability of the organizers.
 
None of the owners ("members") of a limited liability company (LLC) are personally liable for the debts of the LLC. Similarly, the owners ("shareholders") of a corporation are not personally liable for the debts of a corporation.