The main drawback of a sole proprietorship is unlimited personal liability. The business owner is personally responsible for all the debts and obligations of the business, meaning that their personal assets such as savings, property, and vehicles can be used to settle business debts or legal claims against the business.

Additional Key Drawbacks

• Difficulty in raising capital: Sole proprietors often face challenges in securing loans or attracting investors because lenders consider them riskier and they cannot issue stock like corporations.

• Limited growth potential: The business size is restricted as it depends on an individual, limiting resources and scalability.

• Business continuity concerns: The sole proprietorship usually ceases to exist if the owner dies or retires, making succession and long-term planning difficult.

• Tax implications: Income from the business is taxed as personal income, which can lead to higher tax rates and additional self-employment taxes.

Among these, unlimited personal liability stands out as the most significant drawback because it directly risks the owner's entire personal wealth.