Yes, but if you own a corporation it does not completely protect you from debt either, especially if you own it all yourself.
There is not a lot of expense in what I and other residential/light commercial designers rack up. I've got a four year old lap top, two old plotters (one from Ebay for $150 and one given to me from an employer who upgraded), a blueprint machine (another hand me down that I seldom use), Acad Lt 2008, digital camera, measuring equipment, paper, ink/toner and gas. ... it feels like zero overhead.
It costs $1,000 to start an LLC in MA and then you have another tax number, more rigid record keeping and reporting, separate corporate taxes,and required liability insurance. That's a big chunk of time and additional overhead expense for a company grossing $10k. Grossing $10k is not a given for a start up either. I've been doing this for several years and that is about how much I can handle while holding down a full time job and a family.
Taxes are done on a regular 1040 plus a few other small sheets. I usually do them myself because I don't have much to write much off. ... very simple.
I agree-- in a small service business, company debt is a minor consideration. Even if you incorporate, most companies who give you credit/loans (venders, credit cards etc) will require your personal guarantee anyway.
I would definitely check with an attorney and/or CPA regarding which setup would be best for you in terms of taxes, etc. They can also set you up to deduct a percentage of utility bills, etc based on the s.f. of your office. Incorporating also help start and establish business credit. I started out from home almost 5 yrs ago and incorporated my business. I also had to get a home occupation permit that allows me to use my home address as an office address. Check your local regulations regarding running a home business as well as any HOA rules.
The opportunity came up to work for a big corporate client and that is when I got E&O insurance. Having it has allowed me to pursue a wider range of projects.