Depending on the type of business sometimes incorporation when you're just starting out is overkill.
Personally, to limit the liability, I would only incorporate if price she's charging individual sales or services were enough to be scary about paying back if something goes wrong. Or if the service she's providing would impact the customer's business if she screwed up (i.e. broke their website and now they're not making sales.
If she's just selling $20 items from an eCommerce site sole-proprietor is good enough.
The costs for incorporating and doing yearly taxes is quite a bit more than sole-proprietor. Insurance really depends on the type of business she's running. Some liability insurance might be necessary but she should also be including a contract or terms of service that helps to limit some liability as well.
She seems to be doing her homework about this upfront and that's what I would have change about how we started our business. Jumping in and starting to work is a lot of fun but less fun when it's time to deal with the nuts and bolts of operating a business.
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