I'm looking into reselling (flipping) retail merchandise on Amazon with FBA. I'm in Canada, I expect profit margins to be tighter.

One thing I'd like to know is if incorporating could save me from the tax burden. Does a company pay all the taxes when buying retail? Can they mark some off in their tax report? What are the advantages of incorporating in a situation like this in Canada?

1 Answer 1


A full answer on whether it makes sense would need to look at a lot of specific factors that would impact the net benefit vs cost of incorporating in Canada. However some quick rules of thumb should be enough here.

In short, the main benefit to incorporating in Canada is that you can defer about half of your total tax bill until you personally use the money earned by the corporation. In some cases, you may have a net reduction in real taxes paid, but that determination would require an in-depth discussion, and is not a guarantee depending on your situation.

The con, is that you would probably pay at least $1k to incorporate initially, and probably at least $500 / year for annual filings.

It is unlikely that a small, low-margin business would generate enough earnings on the deferred taxes to make the headache + expenses of incorporating worthwhile. Doing some back of the envelope math, if you earn a 10% margin on the business, and ran it for 4 years, you need to start the first year with about 30k of income (ie: a 300k investment if you only turned over your inventory annually), so that the income earned from your annual tax deferrals of about 25% would pay for your incorporation fees + annual filing costs. [The math on this is 30k * 25% = 6k annual tax deferral, which earns an extra $600 / year of margin on additional goods resold, over the course of 4 years, and compared with the initial and ongoing costs of incorporation].

The longer you can defer using the income personally, and the higher the earnings on the deferred taxes, the better. In particular, if you turned over your goods monthly, then it starts to look more promising, but using the above math that would mean you could expect to earn about $360k of net income in year 1, and that seems... overly optimistic to me. If you edited your question to include some estimates of your margin, annual income, initial investment, and turnover rate, that would help to narrow it down.

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