What is one significant disadvantage of being a sole trader?

Being a sole trader comes with the significant disadvantage of unlimited liability, which means that the owner is personally responsible for all debts and obligations of the business. In the event of financial trouble or legal issues, creditors can pursue the owner's personal assets—such as their home or savings—to settle business debts. This creates a high level of financial risk for the sole trader, as their personal and business finances are legally considered one and the same.

In contrast, aspects such as the ability to share profits or the requirement for registration may not be particularly applicable or relevant disadvantages in this context. Complex decision-making is generally not a characteristic trait of sole traders, as they tend to make decisions independently rather than collaboratively, which can simplify the decision-making process. Therefore, the unique characteristic of unlimited liability is a fundamental disadvantage that can have significant personal and financial implications for a sole trader.