Katie wrote:
- quote -

Thanks for your response.

I was planning on incorporating mostly because of protection
from liability, but also because I figured it would be good
as far as getting more clients. I do understand what you
are saying as far as a practitioner being personally liable
for professional acts and omissions. That is why liability
insurance will probably be needed in addition to the
incorporation of my practice.

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Tony wrote:

- quote -

Tony, why do you want to incorporate your CPA practice?
There was a time when you could establish more generous
retirement benefits for yourself by using a corporation
rather than a sole proprietorship or partnership, but I
think most of those differences have disappeared (and, IIRC,
they never applied to S corporations). Incorporation may
protect you from some kinds of liability claims, but a
professional practitioner is generally always personally
liable for his own professional acts and omissions.

You may already have done this, but if not, I would suggest
you consult an attorney to find out just what protections
you might get from incorporating under the laws of your
state. You may find that it is not worth the trouble.

Katie in San Diego

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Thank you for the information. I did some reading on what
you said, and if I elected to be a C-Corp then I would be a
"qualified personal services corporation" as defined in IRC
Sec. 448 (d) (2) and would pay the 35% flat tax rate as you
had stated.

I do have one other question. While I do think I should
elect to be a S-Corp after I open as a Professional Services
Corp (for NYS purposes), is there any reason why being a
C-Corp would be better for professional services corps? I
am not asking in the traditional S-Corp vs C-Corp sense, as
I know most of the advantages/ disadvantages of S-Corp vs
C-Corp, but am asking specifically with a Professional
Services Corp. My personal tax rate would be below the 35%
flax tax rate, so that is why I think an S-Corp would be
best for me.

Again thanks in advance for any help on this.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Tony wrote:

- quote -

The term Professional Corp. or Professional Services Corp. is
defined by the state in which one incorporates. Usually, you
can opt for C or S status. To the IRS for tax purposes, there
is no such entity as a Professional Corp. or Professional
Services Corp. If you are an S Corp., the profits and losses
are passed through to the owners and get reported on the
owners' individual tax returns. If you are a C corporation
you pay tax using the corporate graduated rates unless you are
a "qualified personal services corporation" as defined in IRC
Sec. 448(d)(2). If you meet that definition, you pay a flat
rate of 35%. These entities are usually identified as PSCs.
It is likely that a "C" type Professional Corp. in a given
state, is probably a PSC for tax purposes.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I am a CPA in New York State, and I am a bit embarassed
asking this since as a CPA I should probably know this. I
have decided to form a professional services corporation for
the side tax work that I do (I am currently filing Schedule
C since I am not incorporated, I also do work for a CPA firm
3-4 days a week but I am a salaried employee receiving a W-2
from that firm)

While I have opened C-Corps/S-Corps for clients, I have
never opened a professional services corporation. I have
searched the IRS website and other search engines. I do
know that form DOS-1523 is what I would use for the New York
Certificate of Incorporation. What I don't know is what
needs to be done after that (besides filing form SS-4 to get
an EIN). Some of the information that I have read online
seems to say that a professional services corporation can be
a C-Corp/S-Corp or LLC.

I am also confused as sometimes when I do searches for
professional service corporation, I get information for
personal service corporations.

What I am looking for is what if any is the difference
between a professional service corporation and a personal
service corporation. Also, is it true that a professional
service corporation can be set up as an S-Corp (which is
what I would prefer if possible). If not, then what forms
need to be filed besides the DOS-1523 and SS-4?

If anyone has a better suggestion for opening a professional
services corporation for my situation other than as an
S-Corp, please let me know.

Thanks in advance for any help on this!

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >