What is a “personal services corporation” and what are its tax implications?
Wednesday, November 26th, 2008What is a “personal services corporation” and what are its tax implications?
A personal service corp. is a, generally, a corporation that loans out the services of a doctor, a lawyer, an architect, a CPA. Those are professions, among a few others, that the regulations specifically mention. Personal service corps. are very different from regular corporations in that net income is taxed at the shareholders’, or owners’, highest rate. Currently, the highest federal rate is 35%. So the first dollar of income from your personal service corp. would be taxed at 35%, not at graduated rates as a regular corporation would.
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