I have a three unit building, 2 are business and 1 residential. The square footage is 4 times larger than the retail side, however the annual income generated from both business units is larger. I was originally thinking of going by the square footage , however since the income is greater from the retail I now tend to go the other way. What is recommended?

Square footage is one factor. Income is another. But there are other factors. For instance:
Income per square foot;
The borrower's statement of intent (what do they consider the property to be?);

You need to make a determination of the primary use.

Business, however the one unit is residential and rented out as such. The other two are insurance and an accountant, both of those units together do generate annually more income than the one residential unit. The are all business investments for the borrower.

I agree with David that you just need to make a determination of the primary use. In other words, just look at your file (and/or get clarification from the lender/borrower), decide which is the best option, and then make sure your decision is appropriately documented.

"4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis."