What Is a Federal Principal Business Code

Several federal agencies, including the U.S. Census Bureau and the Internal Revenue Service, use NAICS information for economic information and comparison. The U.S. Department of the Treasury publishes an annual publication entitled Top NAICS Codes: A Guide for Small, Minority-owned and Women-owned Businesses, to determine what types of businesses exist in these categories for research and planning purposes. Primary business activity codes, sometimes referred to as professional activity codes, are 6-digit numbers assigned to specific business activities. These codes tell the IRS and others what your company is doing. For example, a construction company that builds houses has a different number than a company that changes clothes or creates websites. An IRS primary business code is a six-digit number that ranks the primary type of related products or services that the business sells. As mentioned above, if you have a few revenue streams in your business, you need to enter the one that brings the most income. According to the IRS, “primary business activity” is defined as the activity that gives you the largest percentage of “total income.” This code categorizes sole proprietorships or independent contractor jobs based on an activity in which they are heavily involved to facilitate the administration of the IRS. In other words, it is determined by the business activity that generates the most income for it.

Most types of corporate tax returns require you to provide both a primary description of the business and the PBC. The description should include the category and a few words that provide more details about your customers or customers. The IRS gives the following two examples: “wholesale of equipment to retailers” or “valuation of real estate for credit institutions.” There are actually three such codes: the first two are the PBC and IRS business activity codes. Fortunately, both codes use the same labels as NAICS codes, which are reviewed and updated every five years. Because these numbers have been so well normalized, you can use them interchangeably. When you are asked for your PBC number in a form, it is usually the same as your NAICS or IRS Business Activity Code number. There is no “official” way to change a company`s NAICS code, and there is no central registry that represents the “official” NAICS classification for corporations. The North American Industry Classification System uses the first two-digit code to represent broad categories such as agriculture, forestry, fishing and hunting (11) or accommodation, food and beverages (72).

On the NAICS website, these categories are listed in numerical order. You must enter the main business code in Schedule K, line 2a, and the main description of the business in Schedule K, line 2b. Then enter the description of the product or service in Appendix K, line 2c. If you do not see a description in a category that applies to your business, you can select a description that begins with “Other” or “All Others”, .B. “Other Public Transportation and Ground Passenger Transportation” (485990) or “All Other Personal Services” (812990). The government is always measuring and looking for information that can help it monitor the economy. NAICS codes allow the government to collect data on growing industrial sectors, their contribution to the economy, and other similar information. It also shows when a particular industry is shrinking or struggling. This data is compiled into a variety of government reports and studies.

It is sometimes difficult to place your business in a predetermined NAICS category, especially if you have diversified your offering across multiple industries. In this case, there is a code called “other” that you can use. Although the Small Business Administration (SBA) was created for statistical purposes, it used NAICS codes to determine what is considered a “small business” in various industry categories. Sometimes, companies allow project bids to come only from companies within a certain NAICS category. The IRS requires certain businesses to include their primary business code on their tax returns. PBCs are based on NAICS codes, and you can find them in Appendix C of the IRS tax code. When choosing your PBC number, it is important that you focus on your core business activities. For example, if you have an auto repair shop but sell snacks and candy in your waiting room, your main business is mechanical repair. This is the company code you would choose. Snack and beverage retailing is a small part of what you do, so you don`t have to code that particular activity. For example, full-service restaurants use PBC 722511, while cafeterias and buffets use PBC 722514. A non-residential corporation uses PBC 236200, while a housing corporation uses PBC 236100.

If you use the list of PBCs at the end of Appendix C, which you can find for free on the IRS website, you can find your PBC quickly. The five-digit NAICS code is the level at which codes and definitions are comparable for most NAICS sectors in the three NAICS countries (United States, Canada and Mexico). The 6-digit level allows the United States, Canada, and Mexico to each have country-specific details. A complete and valid NAICS code contains six digits. NAICS is a two- or six-digit hierarchical classification system that offers five levels of detail. Each digit in the code is part of a series of increasingly narrow categories, and the more digits displayed in the code, the more detailed the classification. Let`s say you own a retail store that sells recreational vehicles like motorcycles and ATVs. Your NAICS code is 441221. Here`s how it breaks down, courtesy of The Nest: The SBA sets size standards for each type of business — based on annual income or average employment — that are used to determine whether a business is considered a “small business” for the purposes of the SBA loan guarantee. For example, a builder of new single-family homes (236115) would only qualify as a small business if their annual income was $39.5 million or less.

There are other forms of U.S. government where you may see a requirement for a primary enterprise code. One of them is the Small Business Administration. This agency also requires NAICS codes for businesses wishing to participate in an SBA loan guarantee program. In the other case, if you want to become a federal government contractor, you will need to enter a code in your application. The business code used by the IRS to classify your business is based on the North American Industry Classification System (NAICS), which is updated every five years and was last updated in 2017. The name of the company codes is also called “Professional Activity Code” or “Main Company Code”. In addition, Small Business Administration uses your company`s industry-leading business code for your business size to distinguish small businesses from medium and large businesses. If you would like to learn more about the U.S.

Census Bureau and other federal statistical offices and their analysis of data for the U.S. economy, please visit the IRS.gov website. The third digit places the enterprise in a subsector in its economic category, while the fourth further restricts the field and designates the industrial group. The fifth digit represents the NAICS industry and the last the domestic industry. Each number narrows the field and provides more specific information about what a company does. It still seems as clear as mud, so let`s turn to an example of help. If you are self-employed and have already tried to file your own tax returns, you will need to choose a business code for your business on your tax returns. You may have wondered then, what is an IRS master business code? What are its objectives? How do I find and find my company code? Thus, has over 10 years of experience in publicly traded companies and accounting firms providing tax, accounting, payroll and advisory services to clients in diverse industries including manufacturing, wholesale/retail, construction, real estate development and investment, banking, finance and professional/legal advice. Especially when that was the case at Pricewaterhouse Cooper, so he worked with many foreign American companies…