Are you interested to know what the Business Code for consulting is? The Principal Business Code (PBC) must be obtained by every business in the United States in order to file for federal business income taxes.
Accordingly, each business has its own SIC and NAICS codes that indicates the type of work that it performs. The SIC codes may have up to four digits, whereas the NAICS codes may have up to six digits.
The SIC and NAICS codes were developed by the Federal Government and are used by US statistics agencies, as well as by the Office of Management and Budget (OMB).
It is worth mentioning that there is a slight difference between. NAICS and SIC codes A NAICS code covers 1170 industries while a SIC code only covers 1004 industries.
In addition to covering 358 new industries, NAICS was created by the statistical agencies of the United States, Canada, and Mexico.
It may be difficult to understand why the consulting business requires business code. As a result, we will be exploring this topic in this article along with the underlying concept behind NAICS and SIC.
What is a Business Code?
In order to set up a consulting business, you must take care of a considerable amount of paperwork. In the United States, business codes such as IRS business code for consulting are used by the Internal Revenue Service (IRS) to categorize your business, in order to compile statistics about your business.
This process involves identifying the industry in which your business operates, describing the type of product or service you offer, as well as who your business targets.
There is no effect on your tax returns based upon the code you enter for your business, and choosing the incorrect code will have no impact.
A PBC (Principal Business Code) must be assigned to every business in the United States. This code is required when filing tax returns and submitting documents to other government agencies.
Since 2004, the US government has no longer assigned SIC codes to businesses. Therefore, you are required to provide the NAICS code for your business instead.
What is a NAICS Code?
The NAICS code is a group of classification codes developed by the U.S. government in collaboration with the Canadian and Mexican governments.
For the purpose of collecting, analyzing, and publishing statistics pertaining to the US economy, these codes such as management consulting NAICS code were developed by the federal statistical agencies.
There is an automatic assignment of the NAICS code. In other words, there is a list of codes available for different industries and companies that may be selected according to their specific activity such as business activity code for consulting.
You may need to use more than one NAICS code if your company engages in more than one line of business. The NAICS code is composed of six digits, for example business code 541600.
In order for your business tax return to be complete, you must enter the codes assigned to your business. In the event that you have more than one registered business, your tax returns must be filed separately.
NAICS Code Meaning
The numbering system for NAICS codes works in the following manner:
- Numbers 1 and 2: Indicate the economic sector in which the company is located
- Number 3: You will find the company's sub-sector
- Number 4: Indicates the industry group that the company is a member of
- Number 5: The company's particular industry is identified
- Number 6: The national industry of the company is identified
As a result, every NAICS code relates to an individual business and describes what it does
NAICS Code for Consulting Businesses
According to the NAICS system, 1170 industries are covered. This system consists of a six-digit code as well as the Subsector, and Industry Group.
For example, a consulting business would fall under the NAICS Subsector 541: Professional Scientific and Technical Services.
An appropriate Industry Group would be 5416: Management, Scientific, and Technical Consulting Services.
There are several principal business codes for consulting such as 54161 Management Consulting Services, 54162 Environmental Consulting Services, or 54169 for other Scientific and Technical Consulting Services.
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|
You can check the full list of NAICS codes for 2022 for more information.
What is a SIC Code?
The Standard Industrial Classification is also known as the SIC. Assigning these four-digit codes to businesses is a function of the United States government, with the sole purpose of identifying the business's primary activities. Unlike NAICS, the SIC covers only 1004 industries.
The SIC codes were replaced by the NAICS codes in the United States in 2004. However, there are some government agencies and departments that continue to use SIC codes, such as the Securities and Exchange Commission (SEC).
SIC Code Meaning
The SIC codes have four digits and there are more than 1,000 unique codes nationally recognized.
- The first two digits are used to identify the major group, which is then further divided into 12 groups at higher levels
- The third digit reveals a little more detail – more specific industry groupings
- The fourth digit shows the industry sector
The official US Standard Industrial Classification code is always four digits; however, some private companies use six, seven, or eight-digit versions of these codes for more specific marketing or research.
SIC Code for Consulting Businesses
SIC hasn't been revised since 1987, so it may not be as comprehensive as NAICS. However, it is used by the Securities and Exchange Commission.
Here are the SIC business codes for consulting:
|8742||Management Consulting Services|
|8748||Business Consulting Services, not elsewhere classified|
You can check the full list of SIC codes for 2022 for more information.
What is the Difference Between NAICS and SIC Codes?
SIC codes are still used as the primary method of classification by many private companies, while NAICS codes are used more frequently by government agencies.
The SIC code system has been used since 1937. Despite the fact that the system has been revised over the years to reflect the change in the economy, the US government decided in 1997 to implement a new categorization system as a result of the NAFTA agreement.
NAICS is the new system for classifying businesses used in the U.S., Canada, and Mexico, and is designed to provide more specific information on the types of businesses.
There are six digits in NAICS codes and they are updated every five years; the most recent release was in 2017.
Our discussion in this article focused on the consulting business code. All businesses in the United States should have a Principal Business Code (PBC). PBCs are required in order to file federal business tax returns.
Aside from categorizing your business according to its products and services, PBC also categorizes it according to its customers.We hope that this article will be useful to you. If you have any questions or comments, please do not hesitate to leave them in the comments section. Following us on Facebook and Twitter will allow you to stay up to date with our newest articles.