An unincorporated business is a business that has not been legally registered as a business with the relevant state authorities. Unlike an incorporated business, which has an independent legal existence, unincorporated companies are not distinct from their owners. The main difference between an incorporated and unincorporated business is the way owners shoulder business activities. Here are some key differences between the two:

Incorporated Business

• A separate entity from the business owner, and has its own rights, liabilities, tax obligations, and more.
• Protects owners from liabilities they might incur from running the business.
• Can stand alone in the courts.
• Pays taxes on whatever it earns, while individuals who receive payments from the company must also pay personal taxes.

Unincorporated Business

• The owner personally bears all results of the business.
• Sole proprietorships or partnerships.
• Owners of an unincorporated business must report any profits or losses on their own tax returns because the business has no independent existence.
• Usually cheap and easy to form, requiring a bare minimum of formalities to bring them into existence.
• Owners of unincorporated businesses can use business losses to decrease their personal income.

Its important to note that an unincorporated business is not a legal person, and therefore cannot enter into contracts or own property.