PSC (Personal Service corporation)

Qualified personal service corporation (PSC) are subject to a flat tax rate of 35% and has a lower threshold of $150,000 for accumulated earnings tax.

What is a PSC? What is a personal service corporation?

A PSC or personal service corporation is defined as a specific type of company where the shareholder or employer provides his or her own services  for the corporation. Not all personal service activities are considered qualified personal service corporation (PSC) activities.

Incorporating PSC or personal service corporation

In many states, professional businesses that want to incorporate must create a professional corporation. The list of professionals that are required to incorporate as professional corporations varies from state to state. The following list of professions usually are required to incorporate as professional corporations under qualified PSC or QPSC incorporation requirements:

• accountants
• engineers
• heath care professionals such as audiologists, dentists, nurses, opticians, optometrists, pharmacists, physical therapists, physicians, and speech pathologists
• lawyers
• psychologists
• social workers
• veterinarians
• consulting and any other types of work that requires the personal service of the owner shareholder

Forming professional corporation is important because the IRS considers professional corporations to generally also be personal service corporation.