In which legal structure are owners personally liable for debts and obligations incurred by the business?

A sole proprietorship is a business structure where there is no legal distinction between the owner and the business. This means that the owner is personally responsible for all debts and obligations the business incurs, putting their personal assets at risk in the event of bankruptcy, lawsuits, or other financial troubles. In this structure, the individual has complete control over the business but also assumes all liabilities associated with its operations.

On the other hand, corporations, whether standard or Subchapter S, and limited liability companies (LLCs) provide a level of protection for their owners, usually limiting personal liability for business debts. These structured entities help separate personal assets from business liabilities, shielding owners' personal possessions in many situations. This distinction is crucial for understanding risk and personal investment in different business formations.