Discussion:Professional corp
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Discussion Forum Index --> Advanced Tax Questions --> Professional corp
Discussion Forum Index --> Tax Questions --> Professional corp
| 10 June 2008 | |
| Are the terms professional corporation and personal services corporation interchangeable? Aside from the 35% tax rate on the professional corp, can you give me a heads up on the major differences between c corp, pc and psc. Thanks. | |
| June 10, 2008 | |
| Professional Corp is usually a state legal definition, there is no language in the Fed law like that. A professional corp as defined by the state can be either a C or S for Fed unless prohibited by the state. And if a C, is a PSC if it meets the definitions of that by the Feds. Hope that helps. | |
| 10 June 2008 | |
| This is probably a stupid question but why would physician for example want to file as a pc which must be taxed at 35%? Is it because the individual tax rates are so much higher than 35% and the pc was more attractive? | |
| 10 June 2008 | |
| Generally, by state law, certain professionals (e.g., docs, lawyers, architects, engineers, CPA's) are only allowed to incorporate as professional service corps which gives them less liability protection than a regular corp provides its stockholders. Joe Dokes, CPA is a proprietorship. John Doe, CPA, PS is a professional service corp. John decided he wanted to be a corporation for some reason. Maybe because he preferred S corp taxation to Sch C taxation. Or maybe he has co-owners and they jointly preferred corporate taxation to partnership taxation. As long as JDCPAPS elects S status it (the corporation)will not be subject to the 35% tax rate applicable to PSC's. In that case, the corporation is a "professional service corp" but not "personal service corp" as defined for tax purposes. | |
| 10 June 2008 | |
| Professional service corporation: http://www.bizfilings.com/products/profcorp.asp
Personal service corporation: http://www.nysscpa.org/cpajournal/old/10428238.htm | |
| June 10, 2008 | |
| Sadly, many physcians prefer the PSC status, ummmm, because of status. Dumb, but true. | |
| 11 June 2008 | |
| Not all Professional Corporations are subject to the 35% rate. For example, if the spouse of the professional is a shareholder, but not an employee, the 35% rate can avoided by issuing 6% of the stock to the spouse.
Also, it is a fairly simple matter to zero out the corporate profit in a PSC. | |
| June 11, 2008 | |
| Seems like all PC's would also be required to be PSC's, seeing as the requirements are the same. | |
| 11 June 2008 | |
| No, the requirements are not the same. To be a PSC, the corp must be a C corp. A PC may be either a C or an S. There are other differences as well, but it is too late to think about it. | |
| 12 June 2008 | |
| Not all PSC's are PC's and not all PC's are PSC's. Professional corporations are creatures of state law. PSC's are creatures of tax law. | |
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