Does a corporation or a limited liability company provide better liability protection?

One of the primary purposes of forming either a corporation or a limited liability company is to limit shareholders’ or members’ liability for the entity’s debts. In most states, liability protection is specifically called for in statutes authorizing the creation of limited liability companies, while liability protection for corporate principals is created by judges under the “common law.” But in either case, the principles are applied in a very similar manner, so that shareholders of a corporation and members of a limited liability company can be held personally liable for the entity’s obligations only under rare circumstances that justify “piercing the corporate veil.” As a result, the differences in liability protection between a corporation and a limited liability company are so small that they should not be a principal consideration in deciding which type of entity to form. For a thorough discussion of this question, see our article Does a Corporation or a LLC Provide Better Liability Protection?