If you’re starting out as an Amazon, Shopify, Etsy, eBay or ecommerce seller in Canada, one of the first big questions that I hear all the time is: should I incorporate or just operate as a sole proprietor?
The answer depends on your stage, your goals, and your comfort level with complexity. Here’s a breakdown of the pros and cons of each option. There is no write or wrong, it all depends on each indivual but let's help naviagate some of it.
Starting as a Sole Proprietor
Most new sellers begin as sole proprietors, and for good reason:
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Low cost → There’s no formal setup fee. You’re essentially operating under your own name and saying "I'm start a business!". Now you might want to register a business name and GST/HST but we will cover that in another post.
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Simple to manage → Fewer reporting requirements, easier bookkeeping, and no need to separate personal and business accounts, though it’s still a good habit and will make your life easier.
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Test the waters → If you’re not sure whether ecommerce is for you, this is a low-risk way to start without too much compexity and cost.
👉 The downside: as a sole prop, all profits are taxed on your personal return. If you already have a good-paying job, your Amazon income gets stacked on top, often pushing you into a higher tax bracket.
Often I see people start like that for the first tax year, realize they want to stick with it, see their tax bill......and then incorporate.
Incorporating a Business
Incorporation comes with more setup cost and ongoing complexity, but it unlocks benefits you don’t get as a sole prop such as:
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Lower corporate tax rate → Profits inside the corporation are taxed at a much lower rate than personal income. This allows you to reinvest in inventory and growth more efficiently. This is the big flywheel, lower taxes, buy more inventory, sell more, make more profits, pay lower tax, invest more, and the loop goes on.
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Deferral advantage → You can leave profits in the company and control when (and how much) to pay yourself.
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Income splitting → If your spouse legitimately works in the business, a corporation allows more flexibility in paying them, which can reduce your overall family tax bill (and your kids too but we cover that in another blog).
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Professional image → Some sellers find that having “Inc.” or “Ltd.” adds credibility when working with suppliers or partners.
👉 The catch: corporations come with added cost and complexity. You’ll need:
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Separate bank accounts and credit cards
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Formal bookkeeping not just a profit and loss, but also a balance sheet and annual corporate filings
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Professional accounting (higher fees than a sole prop return)
Switch Later
Many sellers start as sole proprietors and incorporate later once the business proves itself. That way you don’t over-invest in legal and accounting fees before you’re sure ecommerce is something you want to commit to. Spend that early money on the business and not complicated legal structures.
If you’re starting small or testing Amazon for the first time, a sole prop often makes sense. If you’re already earning solid income elsewhere and want to scale quickly, incorporation might save you tax and allow you to grow faster.
SO???
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Sole proprietorship → best for testing, low cost, simple setup.
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Corporation → best for serious sellers who want tax efficiency, reinvestment power, and long-term growth.
Every seller’s situation is different. The right choice depends on your income, family situation, and business goals. If you want to talk through it, schedule a call!