LLC Business Purpose Example: Everything You Need to Know
Using an LLC business purpose example is the best way to write a purpose for your Articles of Organization.3 min read
Using an LLC business purpose example is the best way to write a purpose for your Articles of Organization. Your purpose can be as simple as doing legal business or can be a full description of your planned business activities.
Writing an LLC Purpose
All businesses have a purpose. However, it's important to understand there is a difference between your business's general purpose and its legal purpose. Your general purpose is usually related to how you interact with your customers, whereas your legal purpose is the specific business reason that you formed your company.
Most states require that your company's formation documents include the legal purpose of your business. It's common, and understandable, for entrepreneurs to forget to write a business purpose when forming their company. Some states do not require a business purpose to be listed in formation documents, and in states where it is required, you can usually list a vague activity such as pursuing all legal business.
Essentially, the reason that you started your company is your business purpose. In most cases, you should be able to describe your business purpose in a single sentence. You can write a business purpose that is specific to your industry or one that uses general language so that it will cover any future activities in which your business may engage.
Planning Your Business Purpose
Before writing your business purpose, you should understand that this purpose is different from your company's mission or vision statement. Vision and mission statements are vital to your company's future success. However, they are legally different from your business purpose. Here are a few examples of the missions/visions of large companies:
- Microsoft: This company's stated missions is to assist businesses and people in realizing their full potential.
- Google: This company's mission is to organize and provide universal access to the world's information.
Now, let's take a look at the business purpose of these same companies:
- Microsoft: Their purpose is doing any and all lawful business allowed to corporations under the Washington Business Corporation Act.
- Google: Their purpose is engaging in legal activities available to corporations under the General Corporation Law of Delaware.
These are examples of general business purposes, which means the purpose doesn't actually give any indication what type of business the company does. Some companies have much more detailed business purposes that describe the exact activities in which the company plans to engage. General Electric, for instance, uses a four-point business purpose.
Whether you decide to write a specific or general business purpose, you should spend a good amount of time considering the purpose of your business.
When the owner of a business is sued and faces personal liability, it's common for the courts to examine the company's business purpose to decide if the business and its owner are actually legally separate entities. If the court finds an unclear business purpose, or if no purpose is listed, then there may be a harsh judgment against the business owner. In some cases, a company can face dissolution due to the lack of a clear business purpose.
Defining Your Business Purpose
With your business purpose, you will define the reason that your business exists. If there comes a time that your business can no longer fulfill its listed purpose, a member of your company can request that the court dissolve your business.
In 2009, the Delaware Court of Chancery decided that judicial dissolution was warranted in the case of Fisk Ventures, LLC vs. Segal. The company involved, Fisk Ventures, had a rule that stated all management decisions need 75 percent approval from the five-member board. A portion of the board members declined to attend any board meeting for more than two years, preventing proper management of the company.
Because the company's operating agreement listed no way to solve the disagreement, the purpose of the company was undermined, and the board members eventually found themselves in court. This demonstrates that your business purpose does not operate on its own, and can be influenced by multiple factors.
If the company in this example had including a solution for resolving disagreements among board members, they may have been able to avoid dissolution. Without clear language, the interaction between a company's purpose and its governing documents can put the business at risk for such situations.
If you need help writing an LLC business purpose, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.