NAICS Code: Do You Know Yours and Why It’s Important?

If you are a new entrepreneur, you may not know much about NAICS and SIC Codes but it is important that you understand these numbers and determine the code for your business. Why? Your NAICS Code is often asked for on various applications and forms. It is simply easier to know, understand and have this code available when you need it. If you plan to solicit work from a governmental body,you will be asked for your code.

What is this code? The older SIC Code was first developed in the 1930s and last updated in 1987. The Code was not reflective of the modern day economy and and updated system was needed.The North American Industry Classification System or NAICS replaced it and is the standard used by federal statistical agencies in classifying business establishments.

The North American Industry Classification System was developed by the OBM—Office of Management and Budget–in 1997 to replace SIC or the Standard Industrial Classification system. The U.S., Mexico and Canada created the new system jointly to allow a high level of comparability in business statistics among the North American countries.

With definitions for each industry, there is an official 2007 Manual available. It includes definitions for each industry, background information, tables showing changes between 2002 and 2007, and a comprehensive index. The official 2007 U.S. Manual is available in print and on CD_ROM from the National Technical Information Service (NTIS) at (800) 553-6847 or (703) 605-6000.

NAICS Code vs SIC Code

The SIC Code is still being used and sometimes on applications you will see a question asking for either your SIC Code or the more modern code. The federal government does not want your SIC Code but some states may still be using the system. You can check your state’s business pages on their website at right to determine what code they want.
NAICS Code: Find Yours

How do you find your Code? Your business can actually “self code,” based on the way that the system was designed and documented. You cannot simply select a code of 1-2-3-4-5-6-7-8-9-10 for your business; you have to work within the confines of the system to decide on the best code for your business.

To determine the most appropriate code for your business, there are a number of tools and references available from the government. You can click on NAICS here. When you get to this page, click on the search box on the left side of the page and enter a keyword that describes your kind of business. Here is how an auto transmission repair company would find its code:

81 Other Services
811 Repair and Maintenance
8111 Automotive Repair and Maintenance
81111 Automotive Mechanical and Electrical Repair and Maintenance
811111 General Automotive Repair
811112 Automotive Exhaust System Repair
811113 Automotive Transmission Repair

There is no central government agency with the role of assigning, monitoring, or approving codes for establishments. Generally, the U.S. Census Bureau’s classification codes are derived from information that the business establishment provided on administrative, survey, or census reports. (e.g. when a company applies for an Employer Identification Number (EIN), information about the type of activity in which that business is engaged in requested in order to assign a code.

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