Should Your Small Business Become a PCP?

Many small business toy with the idea of becoming a PCP (personal service corporation).  The biggest idea in their minds is to put some legal distance between their business assets and their personal assets in case of a lawsuit.  Before incorporating, it is always advisable to seek legal council.  That aside, there are taxable considerations.  Profits of a PCP are taxed at a flat 35% by the federal government.  This situation applies when the stock is 95% owned by the employees doing the service.  In addition it applies only in the situations of companies involved in law, health, engineering, architecture, consulting, performing arts, or actuarial science.

So if your business involved one of the above mentioned fields, it is very important to seek legal advise before incorporating as a PCP.  Otherwise you could get stuck with a tax bill you weren’t prepared for!


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