The company doesn’t have ‘less’ liability, it has separate liability.

You wouldn’t expect that you would be responsible for the actions of a roommate in most cases. Creating a business entity separates the business from the person running it. The taxes are separate, the owned properties are separate, the liabilities are separate.

Say you own a small restaurant, The building it resides in (if you owned it) is owned wholely by the company. You also own a personal residence. Now a customer comes in and suffers some injury and they sue. They would sue the business and if it all went badly for you they might take ownership of the business assets including the building it’s in. They could NOT however come take your personal residence that’s not property of the business.

If you tried to do some shady biz and change ownership of the assets away from the company before a judgement was made then the customer could feasibly ‘pierce the veil’ as they say and include you into the suit personally.

See 2 comments ago. Nobody except the ultra rich could afford to go into business if it meant risking all of their personal assets.

And like already mentioned: it’s not less liability, it’s separate liability. Misconduct as a business (which may not even be the owner’s fault, it could be an employee’s) can risk all of the business assets, but not personal assets owned outside the business.

The idea behind it is that everyone engages with the company, not an individual. You visit Sam’s widgets, and buy a widget from Sam. A week later, Sam sells the business to Joe and disappears. It’s now Joe’s widgets, with all the same stuff and people (aside from Sam). Your widget breaks under warranty. Is Joe obligated to fix it?

You can see the obvious problems if you say no. Coincidentally, this is the case with all the AliExpress crap on Amazon.

But if Sam isn’t required for business continuity, it can build consumer trust. Even if Sam leaves, customers know they will be taken care of. They can buy with confidence that someone at Sam’s Widgets will keep supplying their widget needs.

Yes, it’s possible for a corporation to escape liabilities. But it’s the case for real people, too. People declare bankruptcy all the time, although there are certain debts that cannot be erased. These often don’t apply to corporations.

Have you ever worked at a place and disagreed with a decision made by the higher ups? Imagine if you were on the hook for every single widget you produced, or claim you processed, or whatever else