I am not an attorney or tax professional and below only represent my personal opinion. I do recommend you talk to a legal and tax professional before acting.
Taxes (This is a Federal Designation):
Sole Proprietorships, S-Corps, Partnerships, and the default tax status of LLCs are all pass through tax entities. Meaning you do not get “Double Taxed”. “Double Taxed” usually refers to the profit/losses beign taxed once as corporate/company profit and again when distributed to the shareholders/owners/members.
C-Corps are double taxed.
Independent of the entity type, the wages you provide yourself will incur employment related taxes (FICA FUTA/SUTA). If you do not pay yourself a reasonable salary for a repeated and ongoing active investments the IRS and State Revenue Agency may come after you.
LLC's are by default treated by the IRS as pass-through partnerships (or disregarded entities if a single member/owner), which means profits and losses flow right to the owners and are added on to their income to be taxed and are not taxed first at the company level (i.e. no double taxation). You can elect to change this by filing a 8832 form. This would cause the company to pay corporate taxes on profits and then when profits are distributed to the members the members pay taxes. There are some cases where you would want to do this, but it is beyond the scope of this post.
Liability (This is primarily a state designation although it is fairly standardized across all the states):
Sole proprietorships and general partnerships are essentially a person(s) acting as a business provides no liability shield.
Any company of any form can have the veil pierced and lose the liability shield if it is not treated as a separate entity from the persons owning the owning the business. A judge may say that intermingling funds or using company accounts to pay personal expenses, or representing yourself as the business or other things may effectively pierce the veil. I have been told be careful not to pierce the veil and always have a notarize Operating Agreement that specifically stating that members cannot be required to put in more money and are not responsible for debts (although watch out for personal guarantees) or liabilities etc (many other things should be in the operating agreement beyond the scope of this post). Single Member LLC's have been in the news for failing to provide liability protection in 2 ways. (1) Someone sues you and gets ownership of the LLC or rights to distributions of the LLC; and (2) someone sues the LLC and you are liable because the veil had been pierced. Some attorneys suggest that you form an LLC with at least one other owner (member) with some material but small interest in the LLC that does not live in your house and that the distributions are at the discretion of the members. The idea being that if someone sued you personally, the judge would not give someone else your ownership with voting rights in the LLC because it would unfairly affect the other member of the LLC. Also the person suing may not want the ownership because the company may not distribute anything but the owner would be liable for taxes. Some suggest having one entity own assets (e.g. property) and have another entity be responsible for operating and maintaining the assets, so that if someone makes a mistake operating etc. there is some liability shield and the plaintiff cannot get the assets(again the idea of "piercing the veil" is important here).
If you are really concerned about liability you should use the right entity (entities), but also make sure you have the correct relatively inexpensive insurance coverages (including but not limited to structure and liability on the properties, O&E on business, personal umbrella policies)
The aforementioned is personal opinion and none of the content should be construed a binding offer or agreement. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. I recommend consulting a qualified profession before acting.