A qualified personal service corporation is a type of C-Corporation in which:
- At least 10% of the company’s stock is owned by employees.
- The company specializes in services rather than in physical goods and products.
- The employee-owners perform at least 20% of the personal services offered by the company.
Although the list of qualified services is vast (under IRS code), most personal service corporations specialize in health, law, engineering, architecture, accounting, actuarial science, performing arts or consulting. Companies specializing in financial services, however, are excluded from this list and must form an S-Corporation instead.
What Is a Personal Service Corporation?
Personal service corporations enjoy many of the same legal advantages as do more traditional C-Corporations. For example, limited liability helps to shield any personal assets of the employee-owners from forfeiture or lawsuits.
Personal service corporations also can claim important tax benefits, including:
- The ability to leave earnings in the company. Because the personal service corporation tax rate is a flat 21%, the company can shield some of its income from the higher marginal rates that individual employee-owners must report on personal income taxes.
- The ability to claim a wider range of business deductions, such as healthcare, life insurance, disability insurance and dependent care — all of which can be provided tax-free to employee-owners.
Why You Need an EIN for Your Personal Service Corporation
Before you can form a personal service corporation, you need a Tax ID from the IRS. Also known as an Employer Identification Number (EIN), this unique ID is what state and federal agencies use to track your tax obligation from year to year.
Many banks, vendors and suppliers also will request your personal service corporation EIN before doing business with you.
How to Apply for an IRS Personal Service Corporation EIN
The standard method for obtaining a Tax ID for your personal service corporation involves a lengthy application process with the IRS, complete with:
- Confusing fields
- Complex legalese
- Long delays
At GovDocFiling, however, we’ve developed a streamlined, intuitive EIN application that takes a only few minutes to complete. This one-page form includes all of the fields required by the IRS, but every question is written in plain-speak to minimize confusion.
Personal Service Corporation State Filing and Formation
Our one-page EIN application also includes all state-specific questions required to form a personal service corporation within your home state. Completing this simplified form eliminates the need to file separate applications with both the IRS and your Secretary of State.
After you’ve completed the personal service corporation state filing application:
- Our tax experts will carefully examine your paperwork for accuracy. This review ensures that your application is error-free, thus minimizing potential approval delays.
- You will receive a draft of the filing documents for your approval.
- Once approved, we send the paperwork to the Secretary of State on your behalf, You can track the status of your application via your online portal.
Most personal service corporation state filings can be completed in 2-4 weeks, depending on the state and time of year. Once your personal service corporation legal business name is approved by the Secretary of State, you will receive your completed formation documents. The same legal business name will then be used to complete your EIN, usually within 24 hours.
If you’re ready to officially form a personal service corporation, complete the one-page application form below.