Liability and Financial Risk
The most significant disadvantage of a sole proprietorship is the lack of liability protection. Every business liability is also a personal liability, which means owners have complete personal liability for any debts and lawsuits.
Control vs. Responsibility
Sole proprietors run their companies alone, making all decisions with complete control. However, this also means that they bear all losses personally and have to manage all facets of the business on their own.
Challenges in Raising Capital
Sole proprietors often find it difficult to raise capital. Banks may hesitate to provide funding due to the perceived high risk, and without a formal business structure, attracting investors can be challenging.
Before deciding to establish a sole proprietorship, it is crucial to weigh these pros and cons carefully.