Recently I purchased a domain and put it on as an addon domain with my current hosting account - are there any disadvantages when it comes to SEO because the domain is located within a subfolder of my main directory.
I don't think the server file structure should affect your results as long as you have a unique domain name set up to serve the website files independently.
When you break it down, most domains are 'add-on' domains if they share an IP address. If you look up the reverse DNS entries you get the domain name by which the server is identified.