What are the dangers of having a partnership or sole proprietorship?

The primary worry of most business owners is that if the owner is sued he could face personal liability and place his own assets at risk.  Riskier alternatives to creating a form of business that provides protection include buying insurance, hiring independent contractors (so that they may distance the owner from liability), or to invest silently and have little involvement in day-to-day operations.  While these actions may limit liability to a certain extent, they are considered far weaker protection to an investor than utilizing a protective business form, such as a corporation.