A business purpose statement, also known as a limited liability company purpose statement, LLC purpose statement, or LLC business activity purpose, is an important part of the LLC formation process.
Most states only require a general purpose statement, which means that you aren’t required by law to confine your company to specific business activities before it’s even formed. In these states you’re typically only required to check off a box that explains your company’s purpose or write a short sentence or phrase about it. However, some states do require a specific LLC purpose statement. It all depends on the rules set forth by the government agencies in your state.
In this article I’ll teach you everything you need to know about business purposes and provide you with some examples to get your creative juices flowing.
General LLC Purpose Statement Examples
As I’ve already mentioned, many states that only require a general business purpose statement allow you to simply check a box indicating your company’s purpose. However, if there’s a field for you to write in your LLC’s purpose, the level of specificity you use to create your business purpose statement is up to you.
Here are some general business purpose statement examples:
“The purpose for which this LLC is formed is for any and all lawful purposes and business activities permitted by limited liability companies according to the laws in the state of ____.”
“The purpose for which this company will be organized is lawful business transactions, as well as any and all lawful purposes that are allowed to limited liability companies in accordance with _____ state law.”
“This LLC is organized for any and all lawful business activities that a limited liability company is permitted to perform according to the state laws in ____.”
“For any and all lawful activities for which limited liability companies can be organized in ___.”
You can use any of these general business purpose examples or their variations. They all essentially convey the same message, just in different ways.
Specific Business Purpose Statement
If your state requires a specific business purpose statement rather than a general purpose statement, you have a few options.
- A few words
- A phrase
- A complete sentence
None of these options for business purpose statements are better or worse than the others. However, choosing a complete sentence could provide a more clear purpose and establish clear goals, which is a good way to protect your business in the event that it faces legal troubles in the future.
Here are some specific business purpose examples:
Business Purpose Examples in a Few Words
- Coffee shop
- Gym, fitness center, or yoga studio
- Online retail
- Pizza shop, cafe, or restaurant
- Business consulting
- Computer repair services
- Shipping and logistics
Business Purpose Examples in a Phrase
- Freight services nationwide for the furniture industry
- Frozen yogurt shop, as well as packing and shipping operations
- The manufacturing and logistics of medical supplies and devices
- The sale, purchase, and investment of real estate in the state of ____
Business Purpose Examples in a Complete Sentence
- “The business activities of this LLC will involve the research and development of new and innovative block-chain technologies, as well as an online publication and a paid subscription newsletter.”
- “The purpose of this business is to provide online courses for programmers in several formats. In addition, this business will serve as a national referral network for recruiting.”
- “The purpose of this LLC is to acquire land and construct new homes, as well as selling and transferring various types of property rights and contracts in the state of ____.”
It’s important to note that you can enter more than one sentence in your business purpose statement. I mostly list one-sentence statements here because that’s the format many businesses adopt, but you can add as many as you’d like for the sake of specificity.
Why Does My Company Need a Purpose Statement?
Some states require a purpose statement along with your formation documents, so it’s an important part of forming your limited liability company.
Beyond that, it’s important for legal reasons. Your LLC members could vote at any time to dissolve the company if it is no longer serving its original purpose, or the purpose that’s currently listed (if your business purpose has been amended). This means that you need to think of a good business purpose for your company so that LLC members aren’t as likely to call a vote to dissolve it.
What’s the Difference Between a Purpose Statement and a Mission Statement?
The terms “vision,” “mission,” and “purpose” are often used interchangeably in the business world, so it’s confusing that government agencies make a distinction between a business purpose and a mission statement or vision statement.
It’s even more important for your company to differentiate between these three words as it gains shareholders and LLC members.
Here’s the difference between a company’s vision, mission, and purpose.
Vision
A company’s vision is what it strives to be. It’s the goal that everyone is working towards. It can give everyone working at the company a clear idea of where they should aim their focus to help the company achieve its goals.
It’s been reported that when JFK took a tour of NASA’s facilities in 1962, he asked a janitor about his role in NASA and the man said “I’m helping put a man on the moon.” This illustrates that a company’s vision is the foundation necessary to give each employee an idea of the direction your organization is headed.
Mission
A company’s mission statement should define what the organization does and who it does it for. Of course, you can add an explanation about the benefits your company provides to your company mission statement as well.
Mission statements don’t have to be dramatic or wordy. In fact, OzHarvest’s mission is simply “Fight food waste.” It’s simple, direct, and to the point, describing exactly what the company does.
Your company’s mission can direct its operations because if your mission is to provide fresh, seasonal produce, then this mission will affect business decisions, such as where you purchase your produce and when you rotate your stock.
Purpose
Your company’s purpose statement provides an explanation for why it exists. It’s different from the mission statement, which explains what your company does and for whom.
You can decide to have both a mission statement and a purpose statement, or decide to operate with only a purpose statement. This decision depends on how much importance you place on your mission and vision statements, as well as the nature of your business and the services you provide.
Which Is Better: A General or a Specific Business Purpose?
In most instances, one isn’t any better than the other in the eyes of government agencies. It typically depends on how much work you want to put into developing your purpose. But there’s one specific instance where writing a more specific purpose statement can really benefit your company, and that’s in reference to liability protection.
It can be quite easy to focus on creating a great company that competes with other businesses in the area and successfully makes money, and completely forget about protecting your liability protection in the process. But if you don’t have a strong purpose statement, you risk being personally liable for any lawsuits filed against your company. This can happen if a judge finds that your business is operating outside its purpose, or that your purpose is overly vague.
So creating a clear and concise business purpose statement is crucial for future business success.
Even though writing a specific business purpose appears to mean that you must specify which business activities you’ll conduct, you need to ensure that you leave room for business growth and innovation. If your business offers other services in the future, you’ll be thankful for this foresight.
An example of leaving room would be:
“The purpose of this LLC is to buy and sell real estate, as well as any and all lawful activities allowed by LLCs in the state of ___.”
In this example, the particular business activity of the company is specified, but it leaves room for other activities as well.
Can I Change My LLC’s Purpose Statement in the Future?
Although nearly any bit of information you include with your formation documents seems like it’s set in stone upon filing, purpose statements aren’t.
Most states just use your company’s purpose statement for statistical purposes so they know which industry your LLC falls under as well as why your company exists.
The fact is that an LLC usually grows and changes over time, so it could have more than one purpose at any given time, or the business purpose of your company could change from the original purpose statement.
The good news is that most states will allow you to change your company purpose statement with an amendment to your LLC Articles of Organization.
Another important thing you should remember if you’re changing your company’s purpose is that you’ll also need to make an amendment to your LLC operating agreement. This typically requires company board members to vote on whether to amend the document, and whether they accept the new purpose statement.
NAICS Code Used for LLC Business Purpose Statement
In some states you aren’t required to make either a general or a specific statement but are instead required to designate the reason your company exists by selecting the appropriate NAICS (North American Industry Classification System) code.
This code is used by government agencies as a standardized way to learn about businesses, their industries, and the services offered. This numeric code is filed with the United States Census Bureau.
Conclusion
Your company’s business purpose statement is as important as many of the other decisions you’ll make for your company while filing your Articles of Organization and forming your business. It’s crucial that you choose the wording of your business purpose carefully to avoid future legal woes, but in general most states don’t strictly regulate purpose statements, so you can create a purpose statement of only a few words if you choose. Even better, you can amend your purpose statement whenever you want to, so even though careful thought should be given to your business purpose, it’s not something that’s set in stone or permanent, so there’s no undue stress involved.
While you’re learning about business purpose statements and filing your formation documents, check out my article about How to Form an LLC.
And if you’d like to learn more about LLC formation services, read my article about the Best LLC Services.
