What Is An Establishment In NAICS?

An establishment is generally a single physical location where business is conducted or where services or industrial operations are performed (ie: factories, mills, stores, hotels, movie theaters, mines, sales offices, warehouses, or central administrative office).

Definition of an Establishment

NAICS is a classification system for establishments. The establishment as a statistical unit is defined as the smallest operating entity for which records provide information on the cost of resources—materials, labor, and capital—employed to produce the units of output. The output may be sold to other establishments and receipts or sales recorded, or the output may be provided without explicit charge, that is, the good or service may be ''sold'' within the company itself.

There are cases where records identify distinct and separate economic activities performed at a single physical location (e.g., shops in a hotel). These retailing activities, operated out of the same physical location as the hotel, are identified as separate establishments and classified in the Retail Trade sector, while the hotel is classified in the Accommodation subsector. In such cases, each activity is treated as a separate establishment provided:

  1. No one industry description in the classification includes such combined activities;
  2. Separate reports can be prepared on the number of employees, their wages and salaries, sales or receipts, and expenses; and
  3. Employment and output are significant for both activities.

Exceptions to the single location exist for physically dispersed operations, such as construction, transportation, and telecommunications. For these activities the individual sites, projects, fields, networks, lines, or systems of such dispersed activities are not normally considered to be establishments. The establishment is represented by those relatively permanent main or branch offices, terminals, stations, and so forth, that are either:

  1. directly responsible for supervising such activities, or
  2. the base from which personnel operate to carry out these activities. Although an establishment may be identical with the enterprise (company), the two terms should not be confused.

See - What is an Enterprise in NAICS?