Personal Service Corporations exist where corporations are formed for professional services such as accounting, actuarial science, architecture, consulting, engineering, health, law and the performing arts.
A qualified personal service corporation is taxed at a flat rate of 35% of taxable income. A corporation is a PSC if it meets both of following tests
1. Substantially all the corporation's activities involve the performance of personal services
2. At least 95% of the corporations stock by value is owned by a. employees performing personal services b. retired employees who were involved with the corporation c. an estate of an employee or retiree d. any person who acquired the stock of the corporation as a result of the death of an employee or retiree.
A PSC has a safe harbor of $150,000 for accumulated earnings. IRC 535.
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