I read that people suggest to separate the packages each into their own version control repository. What would be the downside of using one repository and just separating the packages into folders? We are considering keeping one repository when transitioning into packages if it makes sense for our team. Does anyone have any best practice to share? Thanks
Just a personal opinion, so don't take it as a rule.
I see packages as standalone functionalities that depend neither on orgs nor other packages, even if they have dependencies. Also, different packages can be developed by different teams even if they are strictly related (and with dependencies).
A direct consequence of this is having different repositories for each package. However, you could have different folders for different versions of the same package or using different branches for different versions.
Obviously, nothing really stop you: you can work fine with only one repository and many packages inside. It's just a personal matter.