Which legal structure offers limited liability to its shareholders?

A corporation offers limited liability to its shareholders, which means that the personal assets of the shareholders are protected from the debts and liabilities of the corporation. In a corporation, shareholders are only liable for the amount they have invested in the company. This legal structure allows individuals to invest in a business without risking their personal wealth beyond their investment in the corporation.

Limited liability is a significant advantage of incorporating a business, as it encourages investment and entrepreneurship by minimizing personal financial risk. This protection is a key reason why many businesses choose to operate as corporations, especially when anticipating potential risks and liabilities that could arise during their operations.

The other legal structures, such as partnerships and sole proprietorships, do not provide this type of protection. In a partnership, for example, partners generally share personal liability for the debts of the business, which can put their personal assets at risk. A sole proprietorship offers no distinction between the owner's personal and business liabilities, thus exposing the owner to full personal liability for any debts or obligations of the business. While a Limited Liability Company (LLC) also provides limited liability, the specific question asked for the structure that traditionally and commonly refers to shareholders, which aligns with corporations.