Should You Incorporate as A Canadian Amazon Seller?

Canadian Amazon sellers should consider incorporating when their annual net business income exceeds approximately $50,000 to $60,000, according to common Canadian tax planning thresholds. Below that level, the costs of maintaining a corporation (estimated at $2,000 to $3,000 per year in accounting and filing fees) typically outweigh the tax savings. Above that level, the small business tax rate of 12.2% (combined federal and provincial average) compared to personal marginal rates of 30-50%+ can result in significant tax deferral.

Last updated: March 2025

Sole Proprietorship vs. Corporation: Key Differences

When Incorporation Makes Sense

You Are Earning More Than You Need to Live On

The primary tax advantage of incorporating is tax deferral, not tax elimination. If your Amazon business earns $100,000 in profit and you only need $60,000 to live on, a corporation lets you:

Pay yourself $60,000 in salary or dividends
Leave $40,000 inside the corporation, taxed at the small business rate (~12%)
Invest or reinvest that retained amount with more capital than if it had been taxed at your personal rate

According to CRA data, the combined federal-provincial small business tax rate ranges from 9% (Manitoba) to 14.5% (PEI), compared to personal marginal rates that can exceed 50% in some provinces for income above $220,000.

You Want Liability Protection

As a sole proprietor, your personal assets (home, savings, vehicles) are at risk if your business faces a lawsuit or debt. A corporation creates a separate legal entity. While not absolute protection (directors can still be personally liable for certain obligations like payroll remittances and GST/HST), it provides a meaningful layer of separation.

This matters for Amazon sellers who carry significant inventory, have product liability exposure, or operate at scale.

You Plan to Sell the Business

The Lifetime Capital Gains Exemption (LCGE) allows Canadian residents to shelter up to $971,190 (2024 threshold, indexed annually) in capital gains on the sale of qualifying small business corporation shares. This exemption is only available to incorporated businesses.

If you are building a private label brand on Amazon with the intention of eventually selling it, incorporation is almost always worth it for this reason alone. A $500,000 business sale as a sole proprietor would trigger roughly $125,000 in capital gains tax. The same sale through a qualifying corporation could be tax-free up to the LCGE limit.

When Incorporation Does NOT Make Sense

You are just starting out — if your business is not yet profitable or earning under $50,000 net, the incorporation costs likely exceed the benefits
You spend everything you earn — if all business profits are paid out as salary or dividends, there is no tax deferral advantage
You have business losses — sole proprietor losses can offset other personal income (employment, investment). Corporate losses are trapped inside the corporation
You want simplicity — a corporation requires a separate bank account, corporate tax return, annual filings, and potentially payroll administration

The Real Cost of Running a Corporation in Canada

Before incorporating, understand the ongoing costs:

| Expense | Estimated Annual Cost |
|———|———————|
| Corporate tax return preparation | $1,500 – $3,000 |
| Annual provincial filing | $0 – $50 |
| Payroll processing (if paying salary) | $300 – $600 |
| Corporate minute book maintenance | $200 – $500 |
| Additional bookkeeping complexity | $500 – $1,000 |
| Total estimated | $2,500 – $5,150 |

These costs need to be offset by the tax savings of incorporation. For most Amazon sellers, the break-even point is around $50,000 to $60,000 in net business income.

How to Incorporate Your Amazon Business

If you decide to incorporate:

Choose federal or provincial incorporation — federal incorporation costs more but lets you operate under the same name in all provinces. Provincial is cheaper and sufficient if you only operate in one province
Register your corporation — online services like Ownr or similar platforms offer incorporation packages starting around $800
Get a Business Number from CRA and register for GST/HST, payroll, and corporate income tax accounts
Open a corporate bank account — keep business and personal finances completely separate
Transfer your Amazon seller account to the corporation (contact Amazon Seller Support)
Set up payroll if you plan to pay yourself a salary

For a detailed checklist, see our Incorporation Checklist for Canadian Amazon Sellers.

Frequently Asked Questions

At what income level should a Canadian Amazon seller incorporate?

Most tax professionals recommend incorporating when net business income consistently exceeds $50,000 to $60,000 per year and you do not need to withdraw all the profits for personal living expenses. The tax deferral advantage only works if you can leave money inside the corporation.

Can I transfer my Amazon seller account to a corporation?

Yes. Contact Amazon Seller Support to transfer your account to the new corporate entity. You will need to provide the corporation’s legal name, Business Number, and banking information.

Should I pay myself a salary or dividends from my corporation?

It depends on your personal situation. Salary creates RRSP contribution room and CPP credits but has payroll costs. Dividends are simpler but do not create RRSP room. Many Amazon sellers use a combination. A tax professional can model the optimal split for your situation.

Does incorporating protect me from Amazon account suspension liability?

A corporation protects your personal assets from business debts and lawsuits, but it does not protect against Amazon suspending your seller account. If Amazon suspends the corporate account, the business inventory and receivables are still at risk.

Need Help Deciding?

The incorporation decision depends on your specific income level, personal tax situation, and business goals. If you are a Canadian Amazon seller considering incorporation, contact us for a consultation. We can model the tax savings for your specific situation and help you decide the right time to incorporate.