The obvious way to avoid being deemed a Personal Services Corporation is also not really an option for many small corporations: ensure that your corporation has more than 5 full-time employees throughout the year, and/or provide your services only to an associated business.

Is a personal service corporation limited to a calendar year?

Personal service corporations (PSCs) generally must use a calendar year unless (1) a business purpose for having a different tax year is established (Sec.

Is a personal service corporation the same as a professional corporation?

Personal Service Corporation and Taxes Personal service corporations are taxed by multiplying taxable income by 21%. Personal service corporations are not to be confused with professional corporations, which are business entities made up of certain types of professionals under state law.

What is considered personal service?

Legal Definition of personal service 1 : a service based on the intellectual or manual efforts of an individual (as for salary or wages) rather than a salable product of his or her skills. 2 : physical delivery of process to a person to whom it is directed or to someone authorized to receive it on that person’s behalf.

What is a personal service setting?

Personal service settings are businesses that offer services such as aesthetics, manicures, pedicures, tattooing, permanent makeup, body piercing, hair styling, and barbering. These types of services can present a risk for the transmission of blood borne and other types of infections.

What qualifies as a personal service company?

The term ‘personal service company’ (PSC) is not defined in law, but is usually taken to mean a limited company, the sole or main shareholder of which is also its director, who, instead of working directly for clients, or taking up employment with other businesses, operates through their own company.

What happens when you become a personal services corporation?

Corporations who are suddenly deemed to be personal services corporations not only lose their favorable tax advantage of being able to claim business expenses but also become ineligible for the Small Business Tax Deduction, losing their favorable tax rate on the first $500,000 of active income.

Why are there no tax breaks for personal service corporations?

Abstract- Many of the tax planning advantages of personal service corporations (PSCs) have been eliminated to prevent them from being formed to take advantage of tax breaks that are peculiar to PSCs.

What is the tax rate for a personal service corporation?

Personal Service Corporation and Taxes. Personal service corporations are not entitled to any graduated tax rates on their taxable income. As such, all the income generated by a personal service corporation is taxed at the top corporate tax rate of 35%.

Can a personal services corporation claim business expenses?

Bluntly, you do not want the Canada Revenue Agency (CRA) to decide that your corporation fits this definition because a personal services corporation (a.k.a. personal services business) is not allowed to claim any of the standard business expenses, including the Small Business Deduction.