LLC Purpose Statement Example: Everything You Need to Know
You need an LLC purpose statement if you're going to own an LLC. Consult an LLC purpose statement example in order to create your own.8 min read
2. What Is a Limited Liability Company?
3. Articles of Formation
4. Avoid LLC Name Conflicts
5. Registered Agent
6. LLC Management
7. Filing Articles of Formation Is Only the First Step
8. LLC's Duration
9. LLC's Purpose
10. Examples of LLC Purpose Statements
11. More Examples of Broad Purposes
12. More Examples of Narrow Purposes
13. Why Should I Have an LLC Purpose Statement?
Updated July 8, 2020:
An LLC purpose statement example will prove useful to you if you're going to own an LLC. Therefore, it's good practice to consult the LLC purpose statement example of an existing, successful company to guide you as you create your own.
What Is an LLC Purpose Statement?
An LLC purpose statement is a declaration of the reason(s) an LLC was formed. In most states, it is usually sufficient to keep it nonspecific by stating that the LLC was formed to undertake every operation an LLC can legally embark on in a given state. For the record, an LLC's purpose statement is different from its mission statement.
What Is a Limited Liability Company?
An LLC, or limited liability company, is a business similar to a partnership. Before you can form one for yourself, you have to follow certain official procedures, the foremost of which is to ensure the filing of a document with your prospective LLC's home state. This special document is called the articles of formation.
Articles of Formation
An LLC is governed by articles of formation, which are also called certificates of formation, or articles of organization. Some states have different names for them and have different filing offices. For instance, Maryland files in the State Department of Assessments and Taxation, and Arizona files in the Arizona Corporation Commission. They are, however, usually filed with the Secretary of State's office.
In spite of the differences among the states, the following are common components of the articles of formation:
- The name of the LLC, which must be unique in that state to avoid rejection by the filing authority
- The address of the LLC headquarters
- The name and street address of the LLC's registered agent, which must be in the same state
- A purpose statement
- Rules for management
- The duration of the LLC (this can be vague - "perpetual" is perfectly acceptable in most states, and the duration can be renewed)
- Statement of whether the LLC will be run by members or a manager
- Signatures of the members, and possibly their addresses
Avoid LLC Name Conflicts
It helps to carry out a search of already existing business names in your state's database to avoid business name duplication and escape the hassle of rejection. Typically, you can easily do so through the website of your Secretary of State. You should also see to it that the address provided in your articles is your business's main location. If your business has several locations, the documented address should be that of the head office.
The registered agent of your LLC is the person appointed as the recipient of official documents on behalf of the LLC. Such documents include notices of renewal, documents of lawsuits, and other correspondence from the state. The registered agent must be situated in the state of your LLC's formation. The agent's physical address must also be provided.
In several instances, a member of the LLC is appointed its agent and the business's location becomes the agent's address. It is also common practice to designate someone else, usually a lawyer or a company, to play the role of a registered agent. If it turns out the LLC's choice of a registered agent doesn't have an address in the LLC's state of formation, the LLC should hire someone else with such an address.
Either the LLC's members or separate entities can be appointed its managers. As a general rule, your state will require you to show what kind of management you intend to apply to your LLC. That indication should be documented in your articles of formation. You might also be required to supply the addresses and names of your managers.
The availability of such addresses makes it possible for states to send formal documents to the managers and the LLC's registered agent. Typically, states demand the signature and date of at least one organizer of the LLC on its articles of formation. If your LLC is managed by members, it would be good practice to get every initial shareholder of the LLC to sign the articles to officially show their participation in the business.
Filing Articles of Formation Is Only the First Step
When you've successfully prepared and filed your LLC's articles of formation, you've only taken the first of many essential steps in the formation of an LLC. You'll have to proceed by creating an operating agreement for the new LLC in addition to other preliminary tasks.
Your LLC's duration is how long (in years) it will operate. Some states don't require the indication of your LLC's duration in their articles of formation. Other states that require it usually won't ask you to be specific. So, you can indicate that your duration is continuous. In several states, the absence of an indicated duration is taken to mean “continuous” by default. However, certain states legally impose limits on how long an LLC should exist and operate. Such limits are often many decades long. If the LLC still remains in operation after its limited duration expires, it can have a renewed duration for another number of decades.
Though most states do not require you to be specific about your LLC's purpose, and a statement such as "This LLC exists to provide any and all legal business functions in the state" is fine, if you are forming a professional limited liability company, you must detail what exactly the business will do.
Every business has a purpose. There's a difference between the general purpose of an LLC, which is usually related to its brand definition and customer satisfaction, and the particular business goal, which the LLC was created for. However, you can be forgiven for overlooking your business purpose because some states don't even bother making it a requirement. Even states that require it are fine with a generic description. This was not always the case. Years ago, companies could void any deviating agreement, which forced people to read the company charter before doing business, to avoid legal issues.
Ideally, the document listing the LLC's purpose(s) ought to include at least a sentence defining the particular purpose of the LLC's formation. For instance, how the LLC plans on making profit should be stated. The document can also have a generic description. For instance, if the LLC was organized to run a logistics business, the document could read: “To buy, sell, rent, and use vehicles to convey people and goods in the state of Michigan, and also carry out all other legal operations an LLC can engage in.” That provision will be handy if the LLC's business changes course down the road.
Examples of LLC Purpose Statements
Three good examples of business purpose statements are:
- Google: "The purpose of this Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware."
- Microsoft. "The Corporation is organized for the purposes of transacting any and all lawful business for which a corporation may be incorporated under the Washington Business Corporation Act."
- The first part of General Electric's four-point purpose statement is "To manufacture, process, construct, develop, assemble, and produce in any way, to sell, lease, supply, and distribute in any way, to purchase, lease, mine, extract, and acquire in any way, to own, operate, experiment with, deal in, service, finance, and use in any way, equipment, apparatus, appliances, devices, structures, materials, processes, information, tangible and intangible property, services and systems of every kind, nature and description."
Note the ambiguity - the vague nature of the purpose statements allow the companies to move in almost any direction.
An example of a narrowed purpose statement is the following:
"As the nation's leading wireless ISP, our goal is to provide low-cost, easy-to-use products and solutions that let you use your laptop, or the full range of Handheld PCs, Palm organizers, Smartphones, and PDAs, to wirelessly access Web-based information over today's wireless data networks using standard Web browsers." – Google.
In some states, vague statements such as the examples are allowable as LLC purpose statements. In other states, the more-detailed Google goal statement or something similar may be required. If your state requires a more clear purpose statement, it'll usually be a sentence or two about which industry you're in and what your company does in particular.
For a clear understanding, it's important to differentiate an LLC's purpose from its mission and vision. The mission and vision of an LLC are essential to its success, but they are legally different from the LLC's purpose.
More Examples of Broad Purposes
Some more examples of broad purposes are the following:
- Google Incorporated was created to help internet users find high-quality web content easily.
- Google is a profitable, privately owned company dedicated to the provision of web search services.
- Google has a mission of organizing global information and making it accessible and useful the world over.
- Wikipedia is a joint undertaking to provide a completely free encyclopedia in all languages.
- The Wikimedia Foundation's goals are to boost the development and increase of open source content and to offer such content, in full, to the public at zero cost to the users and without advertising.
- The Wikimedia Foundation is a global non-profit entity that's focused on inspiring the growth, creation, and distribution of information in various languages, and to offer all such information to the public free of charge.
More Examples of Narrow Purposes
Some more examples of narrow purposes are the following:
- AT&T Incorporated is a pacesetting provider of secure and reliable wireless data services for mobile professionals and enterprises.
- "Our company is presently dedicated to the provision of a blend of value-added, easily-reachable telecommunications devices and services tailored to the needs of physically-challenged consumers, such as the deaf, the speech-impaired, and the hard-of-hearing."
All of the examples above have, at least, one of the following elements:
- The founder of the company
- The date of the company's formation
- The company market status (especially if it's a market pacesetter)
- The legal organization of the company (non-profit, public, private, corporation etc.)
- The mission, focus, profile, scope, statement, or purpose of the company
- The company's products and services
- The description of the products or services
- The company's target audience
Why Should I Have an LLC Purpose Statement?
If someone sues, one thing the court looks at is your LLC purpose statement. This proves that you are a business. If your purpose is unclear or absent, judgment can be harsh. The LLC can be dissolved for failure to follow its business purpose statement.
In Fisk Ventures, LLC vs. Segal, a company operated by a five-member board required 75 percent approval for all decisions. Some board members refused to attend meetings for years. The judge ruled that it was impossible for Fisk to meet its business purpose and dissolved the company.
An LLC purpose statement does not stand alone. It works with your contracts and agreements and governs documents signed or prepared by your business. Regardless of how detailed your LLC purpose statement is, it is important to give it due consideration. While it is easy and possibly tempting to ignore this, it is vital you have and follow an LLC purpose statement. It determines why your company exists and can be used to dissolve your company.
If you need help with your LLC purpose statement, post your legal need at 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 and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.