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Limited liability is a legal term that explains how much a business owner is responsible for when it comes to debts and other liabilities they incur while running their business. It is designed to protect a business owner's personal assets and finances in the event a business fails or is unable to pay its liabilities. Limited liability shields owners from having to pay debts out of their own pocket and keeps their personal finances safe. This is especially beneficial for small business owners who may not have the resources to cover large debts. Limited liability also encourages business owners to make bolder decisions since they are not personally responsible for the consequences. In summary, limited liability is an important tool that protects business owners by limiting their personal liability and encouraging them to take risks.