Corporations are legal entities established by charter with certain legal rights, powers, privileges, and liabilities. Corporations can be established in several formats but always become their own entity with independent legal rights and obligations. Corporations can be more difficult than other business options in that they have defined structures which you must maintain, however, they offer numerous advantages in terms of legal rights, taxation, and the ability to create stock.
Personal Service Corporation
Personal Service Corporations must have already filed as a C-Corp or S-Corp and have met conditions over the previous tax year. Personal Service Corporations are required to perform personal service activities as their principal activity over the last tax year (starting on the first day of the tax year and ending on the last day of the tax year or the last day of the calendar year in which the tax year begins).
- An employee/owner must perform personal services for or on behalf of the corporation on any day of the testing period
- Employee/Owner must own stock in the corporation at any time during the testing period
- Employee/Owners must perform at least 20% of the corporation’s personal services
- Employee/Owners must own 10%+ of the fair market value of the outstanding stock on the last day of the testing period
Accounting, actuarial science, architecture, consulting, engineering, health and veterinary services, law, and the performing arts are included in Personal services.