Professional Service Corporation (PSC)- Medical Practice

 A PSC is a C-corporation formed under state law to provide services that require a professional license. Common fields include: 

• Accounting, law, medicine, engineering, architecture
• Mental health, physical therapy, veterinary services
• Clergy and nonprofit advisory (if structured around licensed professionals).

Under federal law, a corporation is classified as a PSC if it meets two tests during the prior tax year 

•  Service Activity Test: Principal activity is the performance of personal services (e.g., law, health, accounting). 
•  Ownership/Work Test: More than 10% of stock is owned by employee-shareholders who perform at least 20% of the service work. 

If classified as a PSC, the corporation is taxed as a C-corp may face a flat 21% corporate tax rate and limited deductions compared to S-corps or LLCs.