Which business formation might one choose to avoid personal liability for debts?

Choosing to form a Limited Liability Partnership (LLP) is an effective way for individuals seeking to avoid personal liability for the debts of the business. An LLP provides limited liability protection to its partners, meaning that the partners are typically not personally responsible for business debts and liabilities incurred by the partnership. This structure allows individuals to participate in the management of the business while safeguarding their personal assets from any financial obligations the partnership may incur.

In contrast, a general partnership exposes all partners to unlimited personal liability for the debts and obligations of the business, meaning that personal assets can be used to satisfy business debts. A sole proprietorship does not offer any liability protection, as the owner is personally liable for all business debts. While a general corporation does provide protection against personal liability for its shareholders, it is a distinctly different structure than an LLP and involves different regulatory requirements and governance structures.

Overall, an LLP strikes a balance between flexibility in management and protection from personal liability, making it an attractive option for professionals and small business owners looking to mitigate their risk.