Entities
Limited liability
Limited liability is the legal principle that a company's owners are not personally responsible for its debts beyond what they have invested. It is the central reason for forming an entity. Limited liability can be lost if owners fail to keep the company genuinely separate from themselves.
In plain terms: If the company owes money, they take the company's assets — not your house.
Why it matters
The protection is not automatic and not permanent. It depends on behaving as though the company is a separate thing: separate bank account, no personal spending through business accounts, proper documentation, and current filings. Founders undermine it casually, usually by mixing money.
Common misunderstanding
Treating formation as the end of the work. Protection comes from maintenance, not from the certificate.
Read the full guideUS company formation