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Maybe the system is different here in Canada, but whenever I've spoken to anyone who is in the Immigration system, they are hyper focused on how their occupation will look on their application. Many people delay becoming self-employed for the appearance of stability, others attempt to work in jobs that make them look like upstanding citizens such as public service or charity, etc.
Opening her own business in a "legally grey" industry just seems like asking for trouble.
On your note of paying income tax, even criminal activity is supposed to be taxed. That's famously how they caught Capone! Just because you're not committing tax evasion doesn't mean you're on the up and up!
Hey we're hiring: Business analyst, accountant, IT support, operational manager, etc, etc. All good jobs that look good. Oh it's at company X that...
Just told this to someone else: Yeah but you obviously think this is legal, and your company is automatically deducting from your paycheck.