The Limits of Limited Liability
Formal legal entities like corporations and LLCs serve a number of purposes. They enter into contracts, own property, and can offer favorable tax treatment for some transactions. They offer multiple owners an efficient way to allocate rights. They can sue and get sued. And they also bear all of the responsibility for their obligations, whether to lenders, other businesses, or opponents in litigation. This last point—limited liability—is a significant benefit a freelancer gains by forming a legal entity.
Although limited liability sounds good at first blush, it is important to understand that this protection has boundaries. A business owner sometimes has to assume personal responsibility for a business ...
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