What is a major difference between formal and informal economic sectors?

A major difference between formal and informal economic sectors lies in their regulatory frameworks. The formal sector is characterized by regulated and documented activities, where businesses comply with laws, pay taxes, and provide employee benefits. In contrast, the informal sector operates outside of government regulation, often involving unregistered businesses and unreported income, which can lead to a lack of job security and benefits for workers. This distinction also affects the economic stability and tax revenue of a country.