DEFINITION of 'Personal-Service Corporation'

A corporation that is created for the purpose of providing personal services to individuals or groups. To be considered a personal-service corporation by the IRS, the employee-owners must perform at least 20% of the personal services themselves. The employee-owners must also own at least 10% of the outstanding stock of the personal-service corporation on the last day of the initial one-year testing period.

BREAKING DOWN 'Personal-Service Corporation'

If you function as the owner-employee of a personal-service corporation and your primary business is related to creative/fine arts or photography, any current expenses you incur pursuant to creative work are deductible for the corporation. However, either you or your family members must hold all or nearly all of the corporation's outstanding stock. This rule does not apply to other types of personal-service corporations.

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