What is one type of business entity that limits personal liability?

A corporation is a type of business entity that limits personal liability for its owners, known as shareholders. This means that in the event of legal action or financial loss, the shareholders' personal assets are generally protected, and they are only liable for the corporation's debts up to the amount they invested in the company. This feature of limited liability is one of the primary reasons why individuals choose to form corporations rather than operate as sole proprietors or general partners, where personal assets can be at risk.

In corporations, the business is a separate legal entity from its owners, which provides this crucial protection. This structure allows shareholders to take on risk in business ventures without exposing their personal wealth to the company's liabilities. Overall, the corporation's design fosters investment and economic growth by encouraging individuals to participate in business without the fear of personal financial ruin.