You own a yard mowing company called "Green grass grows" and get paid $20 per lawn. You pay your friend $10 to mow the lawn, pay yourself $5 commission. You also have $2.50 in marketing, equipment maintenance, and insurance per lawn. Last, you pay $2.50 per lawn to your parents, who loaned you start up money. At the end of the day, everyone got paid, but "Green grass grows" posts no profit on their taxes. Keep in mind that companies exist as an entity apart from those people who own it.

If you mow 1,000 lawns over the summer you would have to pay your parents back $2,500. But instead, you're going back to school in the fall, so screw it-- you declare bankruptcy and are now protected from the debt collection efforts of your parents. Next summer, you'll start a company under a different name with money borrowed from a big faceless corporation (aka bank) instead. They have more lawyers to hassle you, but your bankruptcy status allows you to aggressively negotiate your debt down to pennies on the dollar.

The third year, you hire some wackjob who manages to cut off his foot the first day. He decides to sue you for alleged negligence. Because you're not a complete moron, you're not running this as a sole proprietor, rather you have limited liability through your company (an LLC). F-that, you want to backpack Europe anyway, you fold the company, lose any equipment it owned, but keep the money it already paid out to you. You never reinvested in the company, so there is no money in the company accounts for him to take. Your home, car, tuition payments are all safe from him because you paid for those with money you received as taxed salary as an employee of the company...which you also happened to own.

It's not exactly how it works in Hollywood, but that's the idea. (Tbh- it's not exactly how it works in business, but it's close.)