Personal Service Corporation Vs C Corp. A personal service corporation is a specific tax entity recognized by the internal revenue service for businesses that provide personal services to customers, including law firms and medical offices. Unlike the income thresholds for individual taxes, the corporate income tax thresholds are not indexed for inflation.
Formation — c corporations are considered the default type of corporation. How to address irs scrutiny. In most states, people who offer professional personal services — architects, engineers, legal and physician practices — run their practice as personal service corporations (pscs).
When you file articles of incorporation in your state, you’re designated a c corp.
This includes services such as accounting, consulting, health, law, architecture, engineering and the performing arts. The irs defines a qualified personal service corporation (sometimes called a qps or a psc) as a specific type of business where the owner/shareholder provides his or her own services for the corporation. Personal service corporations (those whose employees spend at least 95 percent of their time in the field of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting) are taxed at a flat rate of 35 percent of net profits. They need to comply with particular kinds of tax rules, such as having a fiscal year and abiding to some specific passive activity laws.