This unlimited liability occurs because the most common forms of business entity are sole proprietorships and general partnerships. If a small business has two or more principals, it is most likely to be a general partnership. No matter how big or small your ownership is in a general partnership, your liability is the same. Rather, the risk of exposure to claims resulting from the business should be examined and evaluated. A sole proprietorship or simple oral general partnership may be an adequate form of organization.
Every business is different.
Before you start a new business, you should consult with experienced business attorneys. Existing business owners should consider the various ways to protect their assets from the claims of creditors or claims for personal injury.