1. Personal Liability for Debts

• The owner is personally responsible for all business debts and obligations
  
• If the business incurs losses, creditors can claim the owner’s assets such as savings, home, or vehicle
  
• There is no legal protection or separation between business and personal liabilities
  
• Risk to personal wealth increases in the case of legal disputes or loan defaults
  
• This makes financial risk higher compared to incorporated businesses
  

2. Direct Access to Profits

• All business profits go directly to the owner
  
• The owner has full control over how the income is used or reinvested
  
• No need to share profits with partners or shareholders
  
• Business income becomes part of the owner’s overall personal income
  
• Financial decisions are closely tied to the owner’s lifestyle and spending
  

3. Impact on Credit and Loans

• Business loans are usually sanctioned based on the owner’s creditworthiness
  
• Poor business performance can affect the owner’s credit score
  
• Personal guarantees may be required for financing, increasing personal exposure
  
• Financial institutions view the owner’s income and liabilities jointly with business performance
  
• Borrowing capacity may be limited compared to other structured businesses
  

4. Lack of Retirement and Risk Protections

• There is no automatic provision for retirement benefits or employee insurance schemes
  
• The owner must personally plan for retirement and emergencies using business earnings
  
• Business disruptions can directly impact personal financial stability
  
• Income may be inconsistent, especially in seasonal or unstable industries
  
• Financial planning is essential to manage income fluctuations
  

5. No Separate Legal Protection

• Legal claims against the business are considered claims against the individual owner
  
• Any court judgment or penalty applies to the owner personally
  
• Insurance and proper documentation are critical to reduce risk
  
• Personal and business finances often overlap, which may complicate accounting
  
• Keeping clear records is necessary to manage finances effectively