The Naics Code And Its Significance

By Author: Claudia Tiedemann
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The North American Industry Classification System, commonly known as NAICS, is a system that is now used to categorize commercial operations. This coding is offered as a uniform code in Canada, Mexico, and the United States.

The NAICS Code, which was made with the help of these three nations in 1997, enables a uniform comparison of commercial activity throughout North America.

Why is it necessary?

Authorities at the provincial and federal levels can use NAICS for statistical assessment for both administrative and legislative purposes. This will make it easier for businesses and the government to recognize how an economy is evolving over a period, where firms in some areas may slow down or there might be fewer businesses in a given sector. Meanwhile, it also helps in recognizing the framework for new companies that are expanding and reshaping our economy.

The NAICS is a system of classification that includes all economic activity. It offers a broad categorization of 20 economic sectors and then goes into much more specific information about company activities. One of the 20 economic sectors, the construction ...
... industry, for instance, offers over 500 various business opportunities, such as roofing, plumbing, and the construction of residential and commercial buildings.

When do you require a NAICS code?

1. The registration or incorporation of a new business
The 6-character code that best represents your company's industry and activity must be selected as part of the formation of the firm if you are starting a new business under one of these alternatives.

2. A registered or incorporated entity
When you update an existing business, whether incorporated or registered, the NAICS code will be required.

In the event that your business activity changes, the NAICS code may also. If necessary, you can change your six-digit code to a new one. This Code should never change if your company keeps offering the same goods or services.