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A personal service corporation (PSC) is a type of business that is created for the express purpose of marketing and selling various types of services to individual consumers or even groups of consumers. While a portion of the services provided may be outsourced to vendors who actually manage the service delivery, many nations require that the owners and staff of the personal service cooperation provide at least a minimum percentage of the services offered. In addition, the owners and employees of the PSC must also hold a minimum percentage of any shares of stock that are currently issued by the business.
The range of personal services that may be provided by an individual or a group of individuals under the organization of a personal service corporation is very broad. Bookkeeping and other accounting services may be offered by a PSC, as well as various forms of marketing, sales, or financial consulting. Services related to the performing arts are often recognized as legitimate services that may be offered by a personal service corporation. Health services, including veterinary services, would also fall into this particular business category.
Periodic reviews are conducted to determine if a company is remaining in compliance with governmental definitions of a personal service corporation, usually based on the tax year utilized by the national tax agency in the nation where the company resides. The review normally centers on the business structure and activities of the most recently completed annual tax period, allowing the corporation to continue enjoying that status for the current tax period. Remaining in compliance with the tax regulations relative to a personal service corporation is important, since certain tax benefits as well as tax schedules used to calculate total taxes due may be affected if the company is found to no longer meet governmental requirements for classification as a PSC.
Individuals who own and operate their own incorporated businesses may qualify for classification as a personal service corporation, based on the types of services offered. In this scenario, the owner is often referred to as an employee-owner, especially if the owner is involved in the day to day functioning of the company. Since laws regarding corporations and tax laws relating to corporations vary from one country to the next, it is important to identify the exact criteria for recognition as a PSC in the nation where the business is located, then take the required steps to claim this classification. Information of this type can be obtained from the national tax agency or service, many small business associations, and also from accounting firms who provide services to small businesses.
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