An entity is a separate legal being, such as a Corporation, Limited Liability Company (LLC) or Limited Partnership (LP). All provide much greater asset protection when compared to a sole proprietorship or general partnership. It is the ‘separateness’ of an entity which protects you – the entity’s owner – from unlimited personal liability.
Without that separation, if an angry customer sues you, any assets you own such as your house, car or bank account can all be taken should a judgment be found against you. An entity is a business organized according to state law to limit the liability of the owners.