There is much confusion about the different types of corporate vehicles.This is a basic summary of three different types of corporations.
Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP), Corporation, Sub-chapter S Corporation
Question: Can you give me plain English definitions for the following: (1) a closely held corporation, (2) a personal holding corporation, and (3) a personal service corporation?
Answer is: Generally, a closely held corporation is a corporation that:
Has more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals in the last half of the tax year.
Are subject to additional limitations in the tax treatment of items such as passive activity losses, at-risk rules, and compensation paid to corporate officers.
The definitions for the terms “directly or indirectly” and “individual” are in Publication 542, Corporations.
A personal holding company is:
Defined in Internal Revenue Code section 542.
A personal holding company if both the Income Test and the Stock Ownership Test are met.
The Income Test states that at least 60% of the corporation’s adjusted ordinary gross income for the tax year is from dividends, interest, rent, and royalties.
The Stock Ownership Test states that at any time during the last half of the tax year, more than 50% in value of the corporation’s outstanding stock is owned, directly or indirectly, by 5 or fewer individuals.
Refer to the Form 1120, Schedule PH Instructions for more information and a list of exceptions.
A personal service corporation:

The main work of the company is to perform services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, the performing arts, or consulting.
Substantially all of the stock is owned by employees, retired employees, or their estates.
Examples may be law firms and medical clinics.