It’s a must for every business in the US to have a Principal Business Code (PBC) to file for federal business tax returns. So for each business, there is a SIC and a NAICS code indicative of the field they work in. SIC codes can be up to 4 digits. On the other hand, NAICS codes can go all the way to 6 digits.
Both SIC and NAICS codes were developed by the US federal government and are used for US statistical agencies and most importantly Office of Management and Budget (OMB).
There are mild differences between the NAICS and SIC codes. NAICS covers 1170 industries while SIC only covers 1004 industries. NAICS is updated and covers 358 new industries. It was developed by the US, Canada, and Mexico's statistical agencies.
You may ask yourself, why do you need business code for the consulting business? Well, in this article, we would like to discuss just that and the whole idea behind NAICS and SIC.
What is Business Code?
To set up a consulting business, you need to take care of a lot of paperwork. In the US, business codes are used by the IRS (Internal Revenue Service) to categorize your business for statistical purposes. In simpler words, it is to determine the industry of your business, describe the types of products and services you sell and to whom you sell them.
The entered code for your business won’t affect the tax returns and choosing the wrong code is of no consequences.
Every business in the United States must have a PBC (Principal Business Code). This code is necessary when filing for tax returns and other government agencies.
The US government has stopped assigning SIC codes to businesses in 2004. So you are asked to write the NAICS code for your business instead.
What is a NAICS Code?
NAICS is a classification code developed by the federal government of the United States in cooperation with Canadian and Mexican statistical agencies. These codes were developed for use by the federal statistical agencies to collect, analyze and publish statistical data related to the US economy.
The NAICS code is automatically assigned. Meaning there’s a list of available codes for different industries and companies to select the code that suits their activity the best. If your company is involved in more than one line of business, then you may have to use more than one NAICS code.
NAICS codes are six digits. For example 541613.
The codes assigned to your business are required on all business tax returns. If you have more than one registered business, you must file tax returns separately for each of them.
NAICS Code for Consulting Businesses
There are 1170 industries covered by the NAICS system. This system has Subsector, Industry Group, Industry and the six-digit code itself.
For example, for a consulting business, the NAICS Subsector would be 541: Professional, Scientific, and Technical Services. The Industry Group would be 5416: Management, Scientific, and Technical Consulting Services. And the principal business code for consulting can be 54161 Management Consulting Services, 54162 Environmental Consulting Services, or 54169 Other Scientific and Technical Consulting Services.
As you can probably tell, it starts as a broad range of code and then it slowly shifts down to specific branches of industries.
Here's the list of NAICS business codes for consulting:
|Administrative Management and General Management Consulting Services||541611|
|Human Resources Consulting Services||541612|
|Marketing Consulting Services||541613|
|Process, Physical Distribution, and Logistics Consulting Services||541614|
|Other Management Consulting Services||541618|
|Environmental Consulting Services||541620|
|Other Scientific and Technical Consulting Services||541690|
What is a SIC Code?
SIC is short for Standard Industrial Classification. These codes are four digits and assigned by the US government to businesses with the sole purpose of identifying the primary activities of the business. Unlike NAICS, SIC only covers 1004 industries.
In 2004, the SIC codes have been replaced with NAICS in the United States. However, some government departments and agencies, such as the SEC (Securities and Exchange Commission) still use the SIC codes.
SIC Code for Consulting Businesses
SIC was last revised back in 1987. So, it may not be as complete as NAICS. However, as mentioned above, it is still used in the SEC.
Here are the SIC business codes for consulting:
|8742||Management Consulting Services|
|8748||Business Consulting Services, not elsewhere classified|
In this article, we discussed the business code for consulting. Having a Principal Business Code (PBC) is a must for every business in the United States. To file for federal business tax returns, you are required to submit the PBC. In addition, PBC categorizes your business based on the industry, products, and services you sell and to whom you sell.
You can simply find the code from the tables above.