A personal services business (PSB) is, in the CRA's words, a business a corporation carries on to provide the services of an "incorporated employee" — an individual who, but for the corporation, would reasonably be regarded as an employee of the entity receiving the services. The classic example is a worker who incorporates and then performs the same duties, in the same way, as the regular employees alongside them.
The consequences are significant: income from a PSB is not eligible for the small business deduction, and the deductions available in computing the corporation's income are sharply restricted, so the structure offers little of the usual tax advantage of incorporating. Whether a corporation is a PSB turns on the same factors used to distinguish an employee from an independent contractor, including control over the work, financial risk, ownership of tools, and the ability to hire helpers or send a substitute.