What are the Benefits to Being a Qualified Personal Service Corporation?

A qualified personal service corporation (PSC) is a type of C-Corporation where at least 10 percent of the stock by value is owned by individuals that provide professional services for the corporation. These services may include accounting, architecture, science, consulting, engineering, heath, law, or the performing arts. There are benefits as a personal service corporation, including better tax rates and more control for shareholders, who also contribute their expertise to the business.

Eligibility for Qualified Personal Service Corporations

Because there are significant tax advantages, many well paid professionals organize these unique types of C-Corporations.

The Internal Revenue Service (IRS) uses two tests to determine if a corporation is eligible to qualify as a personal service corporation:

  1. More than 95 percent of the business’ activities are services provided by employee-owners in their respective industry.
  2. 95 percent or more of the corporation’s stock must be held directly or indirectly through partnerships, S-Corporations, or other qualified personal service corporations, either by employees of the QPSC, former employees, estates of said individuals, or anyone who acquired stock though inheritance.

Other Necessary Steps

Because all qualified personal service corporations are technically a C- Corporation, all QPSC are required to obtain an Employer Identification Number, or EIN.

An EIN is a nine-digit tax ID used by the IRS to track the tax responsibilities of various legal entities. You can apply for an EIN for C-Corp online and receive the EIN within 24 hours*, or you can apply for an EIN for C-Corp by mail or by phone and receive the number within 14 days.

*Most EINs are processed same or next business day, unless bundled with state formations, processing times will vary.

Online applications are the fastest and easiest way to obtain this important tax ID. If you’re considering the benefits as a personal service corporation, don’t wait to apply for an EIN for C-Corp.

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