NAICS codes help small businesses show what they do. These codes are used by the government to group businesses by industry. When you apply for loans, grants, or contracts, they may ask for your NAICS code. If you use the wrong code, you might miss out on chances. It also helps in tax filings and reports. So, using the right NAICS code is important for accuracy and benefits.
It also helps when you’re doing market research. You can look up other businesses with the same code to understand your competition. Agencies like the Small Business Administration (SBA) use these codes to decide if your business is small enough for special programs.
Table of Contents
What Is a NAICS Code
A NAICS code is a six-digit number that shows what kind of work your business does. The full form is North American Industry Classification System. This system is used in the U.S., Canada, and Mexico. Every type of business activity has its own code. For example, a restaurant, a clothing store, and a repair shop all have different NAICS codes.
The main goal of the NAICS code is to group businesses that do similar work. It helps the government track business activity across the country. These codes are often used in surveys, reports, and economic research. They make it easy to collect and organize business data.
NAICS codes are also important when applying for loans, licenses, or government contracts. Agencies may check your code to see if you qualify for certain programs. That’s why choosing the right code is very important.
Purpose of NAICS Codes for Small Businesses
Shows What Your Business Does
The main purpose of NAICS codes is to clearly show what your small business does. It helps government agencies, banks, and other organizations understand your business activity. These codes make it easier to sort and group businesses by industry. This helps with reports, tax filings, and business studies.
Helps with Programs and Opportunities
For small businesses, NAICS codes are also useful when applying for support. Programs like small business loans, grants, and contracts may ask for your code. If you use the correct NAICS code, it can help you qualify for special programs. It also helps in tracking industry trends, checking competition, and finding market opportunities.
Builds Trust and Accuracy
Having the right NAICS code helps others find and support your business. It builds trust with partners and clients. It also keeps your records accurate. So, for small businesses, this simple code is a key part of growth and success.
How to Find Your NAICS Code
Use the Official NAICS Website
The easiest way to find your NAICS code is by visiting the official website: www.naics.com. On the site, you can use the search tool. Just type in a few keywords that describe what your business does. The tool will then suggest the most likely codes that match your business activity. Alongside your NAICS code, you may also need a principal business code for official forms.
Search by Industry or Keyword
If you’re not sure what keywords to use, think about your main service or product. For example, if you run a bakery, type “bakery” into the search box. If your business does more than one thing, focus on your main activity. Choose the code that best fits what your business does most of the time.
Ask for Help or Check Examples
You can also ask your local Small Business Development Center (SBDC) for help. They often guide small business owners in picking the right NAICS code. Another easy way is to look at other similar businesses and see what codes they use.
Keep It Updated as Your Business Grows
If your business changes over time, your main activity might shift too. Make sure your NAICS code still matches what you do most. This keeps your records accurate and helps you stay eligible for the right programs.
Why the Right NAICS Code Matters
Using the right NAICS code is important for getting support as a small business. It helps when you apply for loans, grants, and government contracts. Many agencies check your code to see if your business qualifies. If you use the wrong code, you might miss out on programs made for your industry or size.
It also plays a role in your tax and legal paperwork. Some tax forms and business reports are linked to your NAICS code. If the code is incorrect, it can cause delays, mistakes, or even audits. Having the right code helps keep your records clean and your filings accurate.
The correct NAICS code also helps you do better research. You can find industry reports, market trends, and pricing data based on your code. This information helps you understand the market and plan smarter.
Finally, your NAICS code shows others what your business does. When banks, investors, or partners see your code, they quickly understand your field. A clear and correct code makes your business look reliable and professional.
How NAICS Codes Affect Government Contracting
NAICS codes play a big role in government contracting. When the government offers contracts, it uses NAICS codes to define what kind of work is needed. If your business has the matching code, you may be allowed to bid on that contract. Without the right code, your business might not even be considered.
These codes also help the government set size standards. For example, contracts may be open only to small businesses under a certain code. If your NAICS code shows you’re part of that group, you can compete for those special opportunities. This is a big chance for small businesses to grow and earn steady income.
Having the correct NAICS code can also improve your chances of getting listed in government databases. Agencies often search by NAICS code to find vendors. So, picking the right one helps your business get found, trusted, and hired by the government.
Steps to Update or Change Your NAICS Code
1. Review Your Current Business Activities
Start by looking at what your business mainly does today. If your products or services have changed over time, your old NAICS code might no longer be accurate. Focus on your primary source of income and identify your core service or product. This helps you decide if a new code is truly needed.
2. Find the Correct NAICS Code
Visit trusted sources like www.naics.com or the U.S. Census Bureau’s NAICS search tool. Use keywords that describe your current business activities. Carefully read through the code descriptions and compare a few options. Choose the one that best matches your main business function.
3. Update with the Right Agencies
Once you’ve picked the right code, go to the sites where your business is registered, like the IRS, SBA, D&B, or SAM.gov. Log in and update your business profile. If your business is also registered at the state level, update the code there too to keep everything consistent.
4. Keep Records for Future Use
After making changes, save a copy of the new NAICS code and where you updated it. Keep it with your business documents. Make sure your updated code appears on forms, licenses, and profiles. This helps avoid confusion and ensures you’re ready for taxes, contracts, or funding applications.
Conclusion
NAICS codes help others understand what your small business does. They are used for taxes, reports, and applying for loans or contracts. Having the right code saves time and avoids mistakes.
It also helps your business qualify for special programs and stand out in government systems. If your business changes, make sure to update the code. It’s a small step that can make a big difference.
