If you have a professional corporation, you may qualify for pass-through taxation by electing to be treated as an S corporation by the IRS. Most states allow professionals to opt for an S corporation, professional corporation (PC), or limited liability company (LLC).

Is a PC a personal service corporation?

The terms professional corporation (PC) and personal service corporation (PSC) are often confused. Both are corporations and both are owned by professionals such as attorneys, CPAs, architects, doctors, and others. A PC is a corporation composed of specific types of professionals, set up according to state law.

How is a personal service corporation taxed?

Personal Service Corporation and Taxes Personal service corporations are taxed by multiplying taxable income by 21%. Professionals may also take advantage of some tax-free fringe benefits, limited liability, and may receive favorable treatment of business deductions.

What is entity type PC?

Professional Corporations (PC) are corporations for certain occupations – typically, service professions like lawyers, doctors, architects and the like. This means, for example, a PC for law can’t offer design services. Typically, those not licensed in the profession may not be shareholders in a PC.

How are PC taxed?

PCs are taxed by the corporate tax structure. This is a two-level tax system as PCs’ profits are taxed at the company level and again at the shareholders’ level. The IRS levies a 35 percent flat tax rate on PCs profits and then they’re distributed to shareholders in the form of dividends.

Can a PC be a sole proprietorship?

PC: Professional Service Corporation. While legally a sole proprietorship and an LLC/PLLC/PC are different, for tax purposes you may choose to set up your LLC so that it is the same as a sole proprietorship, or you may set it up as a corporation. Consult an accountant to decide what is best for you.

How is a PC taxed?

Is a PC considered a corporation for 1099 purposes?

The same holds true for 1099 forms. Our attorney and our accountant are both professional corporations (PCs). The law is a little fuzzier when it comes to accountants and other professionals, but Hunt advises that 1099s be sent to all providers of professional services, even if they are LLCs or corporations.

How do professional corporations file taxes?

To file a return for a corporation (Form 1120), S corporation (Form 1120-S), partnership/multi-member LLC (Form 1065), or homeowner association (1120-H), you’ll need TurboTax Business to file for your business taxes. You’ll then need to submit a 1040, 1040EZ, or 1040A for your personal taxes.

What tax form does a PC file?

Form 1120-PC
Use Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return, to report the income, gains, losses, deductions, credits, and to figure the income tax liability of insurance companies, other than life insurance companies.

How is PC taxed?

What type of tax return does a PC file?

Most professional corporations are classified as “personal service corporations” by the IRS and must file a professional corporation tax return. As of 2018, all professional corporations pay a flat tax rate of 21%.

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%.

Do PCs have any corporate tax advantages?

PCs do have some corporate tax advantages. Professional corporation tax deductions are the same types that are available to regular corporations and so PCs can deduct the cost of salaries and benefits paid to the employee-owners.

What are the tax consequences of a PCPC?

PCs are subject to a 35% flat federal tax rate on their corporate earnings, which can be a disadvantage since C corporations are taxed at 15 to 34% for their earnings below $100,000. With an LLC or partnership, income is passed through to the members and partners who pay personal tax rates on the income, with rates between 10 and 35%.

How is a professional corporation taxed?

A professional corporation must form a corporation within a state. It is not an LLC or a partnership, and it is taxed as a corporation. A PC is taxed like other corporations at the current flat rate of 21 percent.