Which entity protects its owners from personal liability for debts incurred by the business?

A corporation is specifically designed to protect its owners, also known as shareholders, from personal liability for the debts and obligations of the business. This means that in the case of financial difficulties or legal actions against the corporation, the personal assets of the shareholders generally cannot be targeted to satisfy business debts. This limited liability is one of the primary advantages of forming a corporation, as it encourages investment and entrepreneurship by reducing personal financial risk.

In contrast, other business structures, such as sole proprietorships, general partnerships, and limited partnerships, do not provide the same level of protection. In a sole proprietorship, the business and the owner are legally considered the same, meaning personal assets are at risk. General partnerships also expose partners to personal liability for the debts of the partnership, as each partner can be held personally responsible for the business liabilities. Although limited partnerships offer some protection to limited partners, general partners in a limited partnership still face personal liability for the debts of the business.

Thus, the corporation stands out as the entity that offers the key advantage of shielding its owners from personal liability.