People working in the informal economy are not registered as businesses or employees and they do not pay taxes. This can be beneficial for them because it increases their profit margin or take-home pay. However, they usually earn much less than their formal, registered counterparts.
They are also vulnerable to exploitation by corrupt officials, who can demand bribes or protection payments in exchange for not reporting an unregistered business or employee to the authorities.
Another disadvantage for people running businesses in the informal economy is that their equity in their business is unrecognized and cannot be used to apply for credit or loans that could help them expand.