What Is a Line of Business?

Malcolm Tatum

A line of business (LOB) is a term often used to identify the components or resources that are associated with managing certain types of customer transactions or fulfilling some type of business need. In some circles, the term also has a broader connotation, used as a means of referring to the profession of a specific individual. This means that the term may be applied to individuals working within an industry, a company within a given industry, or even the industry itself.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

The concept of the line of business often plays a role in the creation of different processes for industry classification. Depending on how the concept is applied, the classification process may focus more on the industry type or place greater emphasis on the tasks that may apply to a number of different industries. For example, if the classification process identifies a line of business as human resources, this would obviously be a LOB that would translate well into any number of industry settings.

One school of thought holds that when applied to a field of business, the term is more likely to be used internally. With this application, LOB may have to do with functions within a business, such as sales management or loss prevention. At the same time, a broader application of the term may be used to connect the business enterprise with a specific sector of the business community. For example, a company may be said to engage in a certain line of business such as textiles, communications, or retail.

Other uses of the term are also used in various settings. As an accounting term, "line of business" will sometimes be used to refer to a specific string of transactions that have to do with a particular customer, including the establishment of the customer account, issuing of invoices related to that account and the posting of payments for those issued invoices. In some nations, the term is also used when articulating regulatory restrictions and privileges related to a business operation, based on current laws and regulations.

With any of the several applications of the term, the goal is to identify specific data that helps to define some aspect about an individual or a company. By stating that the business of a given individual is retail sales, this conveys something of the skill set and business activities of that individual. In like manner, noting that the line of business of a given company is textiles, this helps to establish a basis for further exploring the specifics of how that company functions within that particular industry.

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