What is one primary disadvantage of a sole proprietorship?

A primary disadvantage of a sole proprietorship is unlimited liability. This means that the owner is personally responsible for all debts and obligations of the business. If the business incurs debt or faces a lawsuit, the owner's personal assets, such as their home or savings, could be at risk to satisfy business creditors. This level of personal financial exposure can be a significant deterrent for individuals considering this form of business organization.

In contrast, other forms of business entities, such as corporations or limited liability companies (LLCs), shield the owner's personal assets from business liabilities. This fundamental characteristic of unlimited liability makes sole proprietorships particularly risky, especially for businesses in industries that may face legal issues or financial challenges. The other options address potential challenges or limitations of sole proprietorships, but none carry the same weight of personal financial risk as unlimited liability does.