Personal service corporation

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A personal service corporation (PSC) is a corporate entity designated within the United States tax code. The PSC designation is designed to apply to closely held corporations wherein the owner/employees are also 95% or more owners of the stock of the corporation. The designation is meant to encompass engineers, architects, doctors, lawyers, accountants, consultants, and other similar fields of endeavor. The code is thought to have been enacted by Congress to prevent excessive deductions by lone operators who wish to avoid various personal tax liabilities by incorporating their services. By designating a non-employee owner of more than 5% of the stock the PSC designation is avoided according to the ownership test of §1.448-1T(e)(5) of the Internal Revenue Code.