A personal service company is one type of business defined by the IRS for tax purposes. It is very specific and requires you to understand what it is and how it formed to be able to file taxes under this umbrella. The basic definition of this type of business is an owner-operated business where the owner mainly performs services for customers or clients usually in the following fields:
- Engineering
- Actuarial science
- Performing arts
- Consulting
- Accounting
- Architecture
- Law
- Health
Most owners of this type of business hold a business license, such as a medical license. They also provide personal services where the owner is responsible for providing specific services directly to customers or clients, such as providing legal guidance to clients.
Personal Service Corporation Requirements
To legally qualify as a personal service corporation, your business needs to meet several requirements set by the IRS. To begin with, you have to own at least 10 percent of the stock in the company. Second, the business must be at least 51 percent personal services each year. For example, if you own a veterinary office, at least 51 percent of what you do should be providing medical care to your clients. The rest can be selling products or doing other non-medical services for clients, such as boarding pets. Finally, you, as the owner, have to provide at least 20 percent of those services.
Common examples of this type fo business include:
- Law firms
- Accounting firms
- Doctors’ offices
- Surveying companies
Forming Your Personal Service Corporation
A personal service corporation is not a formal business form. Those are still forms such as sole proprietorship, LLC and corporation. Personal service corporations are usually LLCs, so you will need to ensure you get your LLC tax ID number and other legal documents filed to properly form the LLC. You can visit this website to find out more from IRS EIN Tax ID Filing Service about the process and how to secure a personal service corporation tax ID number.
