Similarly, proprietors are responsible for the debts of their one-person businesses. These organizations are safe only when your investment is completely passive. There's not much to go wrong. Your tenant can default on payment, which is your problem. Or someone can suffer an injury on the property, which normally you would cover with insurance.
Partners escape liability by setting up limited partnerships.
These include a general partner, often a small corporation, which puts everything at risk. Limited partners are safe from their company's creditors as long as they don't move too far into management. Still, it's just when things go wrong and creditors start hammering on the door that the temptation to take over management is greatest. For small businesses and some not so small, LLCs often combine the best organizational characteristics. They protect owners from liability to creditors, and they do it without penalizing actions to control a business.