(I know you're not a lawyer, but am trying to get an impression for this). Say instead of $10M I get sued for $50K. In the $10M case I clearly can't pay that but in the $50K case, I might be able to sell my car, move into a cheaper house, etc, in order to pay it. Am I protected in both cases? What about $10K? At what point is it "OK, you can't pay this, go declare bankruptcy so you get to keep your personal assets"?
If you lose a lawsuit (or are hit by some flavor of meteor) the business has to pay for it to be able to continue. All that creating a corporation does is to clearly separate what are personal assets from corporate assets.
It may be easier to visualize if you imagine there are several shareholders. Each would want it clear what were the company's assets and what were their personal assets (in addition to their share of the company).
Look at it this way, you buy 100 shares of GM which subsequently goes bankrupt. Your shares may be worthless but GM's creditors cannot come after you as a shareholder for more than the equity that you contributed (the money you paid for your now worthless shares).
(I know you're not a lawyer, but am trying to get an impression for this). Say instead of $10M I get sued for $50K. In the $10M case I clearly can't pay that but in the $50K case, I might be able to sell my car, move into a cheaper house, etc, in order to pay it. Am I protected in both cases? What about $10K? At what point is it "OK, you can't pay this, go declare bankruptcy so you get to keep your personal assets"?
I think I need to hit the books...