A personal service corporation is a formed corporate entity that provides personal (or professional) services to clients. Some common examples of personal service corporations might be doctors’ offices, dental offices, law firms and accounting firms, among others. To qualify for this business status, a company owner must perform at least 20% of the offered services of the company. If your business qualifies for this, there are several benefits and advantages you can expect.
First and foremost, there are certain tax advantages afforded to businesses set up as personal service corporations. For one, fringe benefits are tax deductible. Life insurance and healthcare benefits can be provided tax-free to employees. Employee retirement plans, like a 401(K) can be designed with higher contribution limits than unincorporated businesses. Lastly, business expenses are also tax deductible.
Another major advantage to a personal service corporation is the structure it provides in the way of limited liability. Since a personal service corporation is considered an independent entity, if debts, claims or lawsuits are brought against it, an owner is not personally responsible. In an LLC, for instance, if claims are brought against the company, the owner’s assets may be seized to make the payments.
A personal service corporation will remain intact even if an owner dies or the shares are all sold or transferred. In other words, it exists in perpetuity. This way an owner can retire or focus on other ventures so far as the requirement of 20% of services are still being performed.
Apply for an EIN Number
If you’re interested in forming a personal service corporation, you’ll need to apply for an EIN number from the IRS-EIN-Tax-ID website. Find out more information on how to obtain a trust tax id or EIN number Colorado for your personal service corporation by contacting the IRS EIN Tax ID Filing Service today.