You are correct. A legal entity of any type is not going to protect anyone given the typical underfunded HN startup profile. The great thing about technology/

You are correct. A legal entity of any type is not going to protect anyone given the typical underfunded HN startup profile. The great thing about technology/web based businesses is that they don't take much capital to start. Unfortunately probably the single most important factor in determining whether a legal entity will be respected when it comes to liability is whether the entity has sufficient assets given the character and nature of the business. So, for a business that is started with say $100K and maintains some assets thereafter, pretty straightforward that shareholders, limited partners, members, etc. will not be personally liable. However, if it starts with $1 and you keep a few hundred to a few thousand in cash or other assets in the business, it's not going to shield you personally. (Of course, you also need to respect all the other formalities, accounting, regular meetings, authorizations to act, etc.) Probably the best thing about using some type of legal entity is (as you mentioned) is that it makes it easier and provides more clarity to "who owns what" when there is more than one person involved in the company.