Limited liability, it's the reason everyone tells you that you need an LLC when you start up your new business. It's the reason you're paying the State of Maine a $175 filing fee and $85 a year to file an annual report.
But what is limited liability really? Which liabilities are limited? Do I have any liabilities that need limiting? How limited is the liability? Is this all just a scam to get you to shell out money that you could be using to pay rent just so you can tell yourself, "I have limited liability and I feel safe."
I will begin by explaining what limited liability does not protect you from. Limited liability does not protect you when you personally make a mistake that harms others. It does not matter if you personally screwed up while working on your business. You personally committed the act and a business entity is not going to protect you.
With that, there are several instances in which an limited liability entity will protect you. The most common would be when your company has bills to pay due but there is no money to pay them. Assuming you haven't personally guaranteed those debt, limited liability would mean that creditors would only be able to collect from the assets of the business. If your business has employees and one of your employees makes an expensive mistake, you would personally be protected. (Assuming you weren't personally negligent when your hired or supervised said employee.) For now in Maine, if even appears as those limited liability could protect you if your business can't afford to pay its employees. (See Saunders v. The Getchell Agency)
In short, limited liability is a real benefit that protects countless small business owners in Maine. Consult with a qualified business attorney to determine which business form is right for your needs.