Since 1997, the North American Industry Classification System (NAICS) has issued multidigit numbers known as NAICS codes to sort businesses by what they actually do. You might need one to access certain tax incentives or to apply for federal government contracts. In some states, you need it to form a limited liability company (LLC). The NAICS code you select feeds into how agencies, lenders, and licensing bodies read your business afterwards.

Below, we cover how to find the code that actually matches your primary activity, what differs for LLCs, non-profits, and early-stage startups, and when a business needs more than one code.

Key takeaways

• Your primary activity determines the code, not your entity type or how you'd describe the business casually

• A company can hold more than one NAICS code, with a primary code reflecting its main revenue source and secondary codes covering additional lines of business

• A NAICS code chosen at formation can be updated later through the agency you filed it with

What is a NAICS code?

NAICS stands for the North American Industry Classification System. It's the numbering system the US, Canada, and Mexico use to sort businesses by what they do. Twenty sectors cover industries such as construction, retail trade, and finance, each split into Subsector, then Industry Group, then NAICS Industry, then National Industry.

Why does a NAICS code matter for your business?

Carefully choosing a NAICS code up-front can save you time and money later on.

Here's why it matters:

• Formation and tax filings: When you apply for an employment identification number (EIN) through the US Internal Revenue Service (IRS) Form SS-4, you'll be asked for your principal business activity, which ultimately correlates to a NAICS code. Plenty of states ask for the code directly on formation documents, too.

• Licensing and permits: Local and state agencies might use your code to figure out which inspections, permits, or regulations apply. A restaurant code produces a different checklist than a retail code, even for businesses sharing the same storefront.

• Loans and federal contracting: The US Small Business Administration (SBA) sets size standards by NAICS code to determine loan and set-aside eligibility. One code might cap "small business" status at US$9 million in revenue; another sets it at US$41.5 million. That difference can decide whether you qualify for certain SBA loan programmes. Contractors registering in the System for Award Management at SAM.gov must list at least one code, since federal agencies use it to match businesses with contract opportunities.

• Banking and vendor relationships: Some banks ask for a code when you open a business account. Vendors or insurers can use it to determine the risk category for your business.

How do you find the right NAICS code for your business?

The US Census Bureau maintains a searchable index of NAICS codes. To determine the right code for your business, take the following steps:

Identify your primary activity

Your primary code should match whichever activity brings in the most revenue, not the one that sounds most impressive or the one you consider your long-term direction. A business that consults on marketing strategy and builds client websites needs to look at the split: if programming work makes up 70% of revenue, code 541511 (custom computer programming services) fits better than a marketing consulting code, no matter how the founder describes the business casually.

Search by function, not industry label

Search the index using specific words that describe what you do day to day, not the broader industry you feel part of. "Marketing" alone is too broad: it contains codes scattered across advertising, public relations, and market research. Each could land in a different subsector depending on whether you're creating campaigns, managing client relationships, or running consumer surveys. A business straddling two categories might not find a perfect fit, and that's fine.

What NAICS code should LLCs, non-profits, and startups use?

The NAICS code for LLCs, non-profits, and startups depends on what your business does, not how it's structured or taxed. LLCs are classified based on whichever activity generates the most revenue, same as any other business. A single-member LLC selling handmade goods online falls under a specific retail code. Non-profits also use the exact same classification system as for-profit businesses.

Startups can face a different problem: the business hasn't settled into one activity yet, but you might still need a code for some paperwork. Classify based on your primary planned activity, not a vague placeholder such as "business services". A startup building a product prelaunch, or testing more than one revenue model, should pick the code closest to what it expects to bill for first, then update later if things shift.

Can a company have more than one NAICS code?

Yes. The Census Bureau only assigns each business one code, generally based on the activity that generates the most revenue. But other agencies maintain their own lists and might assign more than one code.

How does a NAICS code fit into the business formation process?

Founders might need to pick a code early on, based on whatever their primary activity looks like at that moment. That's often an educated guess for an early-stage company, and that's fine since the code doesn't have to be permanent.

A business that changes strategy substantially after formation, such as a company that started as a software consultancy and later shifts to selling packaged software as a product, can update its NAICS code. You should contact the agency that has your information on file directly to change it.

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