Definition of a SIC Code
The Standard Industrial Classification (SIC) code is a system that was developed in the United States in the 1930s for the purpose of categorizing industries for statistical summaries and to facilitate analysis of industrial economic data. This code was, and still is, used by government agencies to classify industries by a four-digit code. This classification aims to numerically identify the primary business being undertaken and where it is being done. Although SIC codes are not a requirement by federal law, they have been adopted by many states, including Illinois .
These codes were updated over the years, most recently in the 1987 Standard Industrial Classification (SIC) Manual and the 1987 North American Industry Classification System (NAIC), which replaced 500 SIC codes with 1,065 six-digit NAIC codes, subdividing manufacturing within each sector.
Law firms, as with other business entities, can benefit from the use of SIC codes. These codes help law firms and individuals who own and operate them, as well as lenders, owners, venture capitalists and other corporations to identify and classify their industry appropriately and understand its needs in depth. Some governmental authorities may require a business to file SIC codes for their industry in order to conduct research related to economic, industrial, and business trends.
Why Law Firms Need to Utilize SIC Codes
The SIC code helps law firms effectively comply with these industry standards. By understanding their SEC disclosures, clients and the general public can better regulate law firms by reviewing the civil judicial big data of cases filed and tracked by the SEC. Additionally, the SEC provides law firms with the SEC Forms and filing requirements for law firms and lawyers. If law firms fall behind on their reporting requirements or fail to make required filings, the SEC begins regulatory action against the offending law firm or law firm lawyers.
SIC Codes are important for law firms in several ways. First, they are required by law – federal, state and local – for transparency and disclosure to government regulatory agencies. Second, law firm SIC Codes allow companies and other law firms to analyze and do business with other firms. Finally, consumers can research law firms and law firm lawyers using SIC Codes to determine how they compare with other competing firms and lawyers.
Finding the Law Firm SIC Code
A SIC Code does not uniquely identify a single company, as one company will often have multiple SIC Codes associated with it. For example, the SIC Code for a law firm whose primary business is in tax law and whose secondary business is real estate law might be 8111 – Legal Services (offices of lawyers) and 8112 – Legal Services (offices of real estate lawyers) respectively.
The first step in determining the right SIC Code for a law firm is to identify its primary business. A qualitative determination of principal product or service is the basis for distinguishing between two or more SIC Codes within the same industry division. The law firm should look at its primary source of revenue, its business activity or activities, and consider whether any of the activities generate 50% or more of its income.
Law firms typically use one or more of the following SIC Codes:
NAICS Code Designation: 541110 (Offices of Lawyers)
SIC Versus NAICS Codes
There are some notable distinctions between the SIC code system and the North American Industry Classification System (NAICS) that may impact law firms for a number of reasons. One reason a law firm might use the SIC code system over NAICS is due to loan requirements. Some lenders may ask for the SIC codes of your practice in order to ensure that the practice does not fall into an industry that would be considered a high credit risk. In that case, it could be beneficial to request a SIC code search so that you may have this information prepared. In addition, law firms that have been in business for a long time will likely already have an established SIC code, as this industry system has been in the U.S. since the 1930s. The NAICS system was not implemented until 1997, so the SIC code system is still considered the standard measurement for businesses that have been around for more than two decades. Many of the differences between the two systems exist in how they classify goods and services. The NAICS code system uses what’s known as a production index, which is a classification system based on how a firm produces goods, as opposed to the SIC code system, where classifications are based on more general factors such as the functions of services.
SIC Codes and How It Affects Legal Marketing and SEO
In terms of legal marketing and search engine optimization, understanding the role that SIC Codes play can give a major advantage to law firms. By establishing a clear identity and industry classification, it makes sense to target a specific SIC Code in order to fine-tune the precision of a digital marketing campaign or settle upon a strategic plan that focuses on strong SEO results.
For example, if you’re interested in targeting specific forms of personal injury law, you could focus on broad industry categories such as "Legal Services," "Attorney & Legal Services," or "Legal & Insurance Services." But you could also consider targeting more specific niche categories like "Legal Services to Corporations" or "Legal Services to Government." You might even decide that while you are mostly interested in "Legal Services to Individuals" (which is the most broad category specific to personal injury law), there is a stronger opportunity for your firm by establishing a more specific legal focus. There are 43 industry SIC Codes that fall under the umbrella of "Legal Services to Individuals," which is a huge variance. If you’re primarily interested in establishing a revenue stream through "Paternity and Family Law Related Services," which falls under the Code with the code number 8111. That is a specific focus, with a narrow set of terms to target and angle your SEO and digital marketing efforts . SIC Codes help legal marketers and firms decide how to target their messages and establish their brand identity. A brief overview of the major categories established by the 1987 SIC Manual are: There are four levels for SIC Codes and classifications; a four-digit classification, a three-digit classification, a two-digit classification, and a one-digit classification. The one-digit is the most broad and general area of business, while the four-digit is the most specific. This is where the granularity of targeting comes in, and this is where the benefit lies for SEO and law firm web design. It’s easy to target everyone at once. Using SIC Codes helps target your message and identify where your practice can help specific people. Using the 8111 SIC Code to market your personal injury services through SEO and online marketing might make the most sense if you’re looking for clients who need family law services, as opposed to sexual harassment or insurance fraud. Using specific legal focuses to establish a strong brand identity is immensely important. Law firms shouldn’t ignore the importance of their website’s design, as it is through website design that law firms have the ability to convey who they are, what their brand is, and how their target demographic can interface with them. SIC Codes are a way of identifying your brand more specifically to reach specific demographics and even more specific offshore outlets through SEO and Google AdWords campaigns.
Updating Law Firm SIC Codes
A law firm SIC code is typically updated based on your billing platform. Your billing department can tell you what SIC code your firm is using, or how to access the code if you have self-access in your billing system. If your firm does not have a billing system, you may need to enlist your IT department to look it up for you.
If your firm uses a third party billing service or law practice management solution without billing, the staff there should be able to tell you which SIC code everyone is using.
Sometimes different billing platforms use different definitions for your profile information. Law firms may use multiple billing solutions or for conflicts checks, client intake and accounting. Therefore, law firms should consider how to update their SIC codes across all billing systems, and who manages it. It may also be important to consider the implications of data syncing, as what used to clear as a duplicate in one system, may now be a record that needs review across the others.
With all of the changes in recent years with the increased focus on adding additional diversity-related measures to law firm profiles, and increase demand for systematic inclusion of diversity information into forms, this discussion has to be cascaded into the diversity information in your systems as well.
When law firms add new services, these should be added to your SIC code at the firm level as soon as possible. Sometimes it is tempting to "batch" the updates in your law firm systems, but this can lead to inconsistencies and delays. You may even temporarily miss out on business opportunities as a result.
Keep in mind that clients can request your law firm’s SIC code when reviewing your law firm as a potential service provider. If a large client goes through your online profile information, and doesn’t see the services they need listed—this could inadvertently disqualify your firm from working for them.
It is also important to update your law firm SIC code information as soon as possible, and not wait to batch the process in only a few times per year, such as in Q4 for the next year. Most likely will work out just fine, it’s very easy mistake to make because we’re all busy with a lot of other projects all of the time.
Common Issues with SIC Codes
One of the most common challenges law firms face when it comes to the Standard Industrial Classification (SIC) code is misclassification. This means the law firm is classified under the wrong industry category. This is especially common among firms that handle multiple practice areas, each serving different industries in different scales – corporations, small businesses, and individuals alike. All of these may fall into one industry or a completely different industry. This can be confusing for companies looking to establish partnerships in the industry through business research and analysis. It can also be difficult to track revenues and expenses in the right industry, making profitability hard to measure.
You can prevent misclassification by properly categorizing the law firm into their appropriate practice area(s). Some firms use multiple SIC codes for one law firm so all practice areas are represented . For example, a firm could be operating as one legal entity, but it operates as a consumer law firm, insurance law firm, and a corporate real estate law firm at the same time. The key here is to have a separate code for each practice area so data analysis is accurate.
Another common issue is simply not knowing what your law firm’s SIC or NAICS code is. Take the time to identify your codes so your firm can fully comply with rule and regulations imposed in your industry. Accuracy is key when it comes to these numbers, so make sure to ask your accountants and attorneys what yours are if no one in your firm keeps track of them. You can also use online directories to find your numbers.
The best way to ensure your firm is properly classified is to keep track of your firm’s financial reports, sales figures and employee structure. Then, research similar firms to see how their revenue figures and employee structure compares to yours. This can give you a better idea of how your law firm truly fits into the SIC.