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Thread: "Personal Service Corporation" Definition?

  1. #1
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    Default "Personal Service Corporation" Definition?


    "Mike V." <valemike@yahoo.com> wrote in message
    news:8188616d.0308050827.2a70cf7@posting.google.co m...
    Hi,
    My cousin and I want to create a corporation for the purpose of using that newly formed corporation to open a beauty salon.
    Does such a corporation need to be described as a "Personal Service Corporation" when I apply?
    Described where? In answer to what question?
    When you apply for what?

    In applying for a federal taxpayer identification
    number, IRS Form SS-4, there is a box to check
    if the corporation is a personal service corporation.
    Is that what you mean?

    The SS-4 instructions include the definition
    of personal service corporation for federal
    income tax purposes.



  2. #2
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    Default "Personal Service Corporation" Definition?

    "tomG" <tmg@jorsm.com> wrote in message news:<YJmdnd3YSPgKebKiRTvU2Q@jorsm.com>...
    "Mike V." <valemike@yahoo.com> wrote in message news:8188616d.0308050827.2a70cf7@posting.google.co m...
    Hi, My cousin and I want to create a corporation for the purpose of using that newly formed corporation to open a beauty salon. Does such a corporation need to be described as a "Personal Service Corporation" when I apply?
    Described where? In answer to what question? When you apply for what?
    I am using an online service to create the S-corporation, and one
    question asked by the website is to check off a box if it is a
    "personal service corporation". Examples of such corporations are
    health and attorney industries, etc. I don't know if a beauty salon is
    classified as such.
    In applying for a federal taxpayer identification number, IRS Form SS-4, there is a box to check if the corporation is a personal service corporation. Is that what you mean? The SS-4 instructions include the definition of personal service corporation for federal income tax purposes.
    It's probably not critical to classify the corporation as a personal
    service corporation except when filing taxes, right?

  3. #3
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    Default "Personal Service Corporation" Definition?

    valemike@yahoo.com (Mike V.) wrote in
    news:8188616d.0308080845.3b74aad7@posting.google.c om:
    "tomG" <tmg@jorsm.com> wrote in message news:<YJmdnd3YSPgKebKiRTvU2Q@jorsm.com>...
    "Mike V." <valemike@yahoo.com> wrote in message news:8188616d.0308050827.2a70cf7@posting.google.co m...
    Hi, My cousin and I want to create a corporation for the purpose of using that newly formed corporation to open a beauty salon. Does such a corporation need to be described as a "Personal Service Corporation" when I apply?
    Described where? In answer to what question? When you apply for what?
    I am using an online service to create the S-corporation, and one question asked by the website is to check off a box if it is a "personal service corporation". Examples of such corporations are health and attorney industries, etc. I don't know if a beauty salon is classified as such.
    A personal service corporation is a corporation that has employee-
    owners performing services in the fields of health, law, engineering,
    architecture, accounting, actuarial science, performing arts, or
    consulting.

    The key point being that the service is personally performed by the
    employee-owners. In many cases because the law requires it. As you can
    see by the examples, most, but not all, of those activities require a
    State license. The notable exception is performing arts, but there it is
    obvious why it must personally be performed by the artist itself, and not
    just anyone he hires.

    For example, a medical doctor has a license to practice medicine,
    and opens a medical office. He can't let just anyone he hires treat his
    patients, as his personal services as a physician are required.

    My guess is that a beauty salon doesn't fit this scenario, but as
    things in this world become more regulated it might. I would contact the
    people who regulate that business in your state, and ask THEM.

    --Douglas

  4. #4
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    Question

    Hi To All.

    Douglas, "A personal service corporation is a corporation that has employee-
    owners performing services in the fields of health, law, engineering,
    architecture, accounting, actuarial science, performing arts, or
    consulting
    ."

    Are these fields the only ones that fall under Personal Service Corp? Do all jobs that require a state license fall under Personal Service Corp. if a Corp opened? For example, if I'm a Real Estate Agent or a Public Notary, and I open a Corp. would my Corp fall under a Personal Service Corp.

    Thanks in advance,
    Miguel

  5. #5
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    Default Personal service corporations; Advanatages / disadvantages of online incorporation

    Unfortunately, this illustrates one of the problems of using online incorporation services - if you don't know the answers to the question being asked (which in this case doesn't make a lot of sense anyway - only a C corporation need be concerned with personal service corporation [PSC] classification), you need to obtain legal and/or tax (accounting) advice prior to or in conjunction with - or instead of - incorporating online. Of course, by the time you pay to consult an attorney and/or accountant, then pay the document preparation services, most or all savings will have evaporated. Also, such services don't usually start from square one, and ask you, Are you forming in the right state? Have you considered an LLC instead of a corporation (or vice versa)? Why or why not?

    Most of the online incorporation services include disclaimers like this one I found in small print at the bottom of one popular site:

    "[Company] is not a law firm and is not a substitute for the advice of an attorney."

    And this on another leading site: "[We] cannot provide information as to whether a person should incorporate or form a limited liability company or a partnership. If you are contemplating forming any of these entities you should consult with private counsel regarding your individual fact situation."

    For those who know exactly what they want, and can explain it to someone else in plain English in a few sentences, the disadvantages of online incorporation services may be overcome by the one big advantage of cost savings. In my experience, however, this is a minority of those who are using such services. And savings up-front sometimes ends up in more expenses later, when I am hired to resolve business disputes the corporation bylaws and LLC operating agreements should have covered, or would have covered, had they ever been adopted, or to dissolve or merge entities, and replace them with better-suited ones.

    You are correct that the personal service classification is largely tax-related. Some regulated professions are prohibited from forming certain types of business entities in some states (e.g., California does not permit professional LLCs - to test out your favorite online incorporation service, try starting the process of forming a California professional LLC online, and see if the system warns you or rejects it before you get to the submit order stage).

    Don't forget state and local licensing and registration requirements.

    Personal service corporation defined: http://biztaxlaw.about.com/od/glossary/g/PSC.htm
    Personal service corporation taxation information: http://www.toolkit.cch.com/text/P07_2026.asp



    Quote Originally Posted by Mike V. View Post
    "tomG" <tmg@jorsm.com> wrote in message news:<YJmdnd3YSPgKebKiRTvU2Q@jorsm.com>...

    I am using an online service to create the S-corporation, and one
    question asked by the website is to check off a box if it is a
    "personal service corporation". Examples of such corporations are
    health and attorney industries, etc. I don't know if a beauty salon is
    classified as such.

    It's probably not critical to classify the corporation as a personal
    service corporation except when filing taxes, right?
    Last edited by Calif Business Lawyer; 02-24-2007 at 02:55 PM.
    California Business Lawyer Jonas M. Grant, Esq., Law Office of Jonas M. Grant, P.C., Los Angeles, California
    Postings are general information only; do not constitute legal advice or form an attorney-client relationship; are not updated and thus may be out of date; and should not be relied upon to resolve specific legal issues. For legal advice, retain an attorney in your state. IRS Circular 230 Notice.

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