Key Takeaways

  • An LLC purpose statement explains why the LLC was created and what business activities it will undertake.
  • Most states allow a general purpose statement, but some require a specific business purpose.
  • Including an LLC purpose statement in the Articles of Organization ensures clarity in legal and business operations.
  • Professional LLCs (PLLCs) often require a more detailed purpose statement specifying the services offered.
  • An LLC purpose statement differs from a mission or vision statement, which focus more on company values and goals.
  • Having a broad purpose statement allows for business flexibility over time, while a narrow statement limits operations.
  • Some states require an additional purpose clause when forming an LLC to meet legal and tax requirements.
  • LLCs may also include any other provision(s) - optional (purpose, statements, etc.) in their Articles of Organization, such as management structures, duration, and specific operational clauses.
  • If you need assistance drafting your LLC purpose statement, an attorney from UpCounsel can help ensure compliance.

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.

Registered Agent

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.

LLC Management

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.

LLC's Duration

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.

LLC's Purpose

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.

State-Specific Requirements for LLC Purpose Statements

Each state has different requirements regarding an LLC’s purpose statement. While some states allow a broad or generic purpose, others require more detail.

  • States That Allow General Purpose Statements
    • Many states, such as Delaware, California, and Texas, permit a broad statement like:
      "This LLC is formed to engage in any lawful business activity in the state."
    • This offers flexibility to expand operations without needing to amend the Articles of Organization.
  • States Requiring a Specific Business Purpose
    • Some states, such as Kentucky and Louisiana, require a more detailed purpose. If forming an LLC in these states, you must explicitly describe your business activity (e.g., "Providing marketing consultation services to small businesses").
  • Professional LLCs (PLLCs) & Industry-Specific Requirements
    • Medical, legal, and financial service providers forming PLLCs must specify their licensed services and obtain state board approvals before filing.
    • Example: "This PLLC provides dental services, including preventive and restorative dentistry, under the laws of the state of Georgia."

Before filing, check your state’s Secretary of State website for LLC formation rules to avoid rejection.

Examples of LLC Purpose Statements

Three good examples of business purpose statements are:

  1. 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."
  2. 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."
  3. 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.

Advantages and Disadvantages of Broad vs. Narrow Purpose Statements

Choosing between a broad or narrow LLC purpose statement depends on your business goals.

  • Advantages of a Broad Purpose Statement:
    • Flexibility: Allows business expansion without filing amendments.
    • Legal Protection: Provides a legal basis for varied business activities.
    • Simplified Compliance: Many states accept a generic purpose without additional approvals.
  • Disadvantages of a Broad Purpose Statement:
    • May Lack Specificity: Some contracts or investors prefer clearly defined business objectives.
    • Not Allowed in Certain States: Some states require a detailed purpose statement.
  • Advantages of a Narrow Purpose Statement:
    • Provides Clarity: Stakeholders, investors, and regulatory bodies understand your business focus.
    • State Compliance: Meets requirements in states with strict business purpose laws.
  • Disadvantages of a Narrow Purpose Statement:
    • Limits Business Growth: Changes in services or products may require amending your LLC formation documents.
    • Time & Costs: Modifications require legal filings and associated fees.

To balance flexibility and specificity, consider a hybrid approach:"This LLC is formed for the primary purpose of providing digital marketing solutions, including search engine optimization, web design, and content strategy. The LLC may also engage in any lawful business activity permitted in the state."

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.

Optional Provisions to Include in Your LLC Articles of Organization

In addition to an LLC purpose statement, you can include optional provisions in your Articles of Organization to define how your LLC will operate. These provisions vary by state but can be beneficial in clarifying business operations and legal protections.

Common Optional Provisions:

  1. Management Structure
    • Specify whether the LLC is member-managed or manager-managed to avoid ambiguity.
  2. Duration of the LLC
    • Many LLCs operate perpetually, but you can set an end date if needed for short-term ventures.
  3. Restrictions on Business Activities
    • Useful for joint ventures or investment-driven LLCs to prevent deviation from core business goals.
  4. Indemnification Clause
    • Protects members and managers from liability for company debts or lawsuits in certain cases.
  5. Capital Contribution Requirements
    • Outlines how much each member contributes financially to start and sustain the LLC.
  6. Voting & Decision-Making Rules
    • Helps define majority vs. unanimous votes required for business decisions.

Including any other provision(s) - optional (purpose, statements, etc.) ensures a clear operational structure and protects the business and its members from future disputes.

Frequently Asked Questions

1. What is an LLC purpose statement, and do I need one?

An LLC purpose statement outlines the business activities your LLC will engage in. Most states allow a general purpose statement, but some require specific descriptions.

2. Can I change my LLC’s purpose later?

Yes. If your LLC purpose needs to change, you must file an amendment to the Articles of Organization with your state. Some states charge a filing fee for this update.

3. What happens if my state requires a specific purpose statement?

If your state mandates a detailed purpose statement, ensure it clearly describes the nature of your business and complies with any professional licensing requirements if applicable.

4. How does an LLC purpose statement differ from a mission statement?

  • LLC Purpose Statement: A legal description of what the LLC does, included in the Articles of Organization.
  • Mission Statement: A strategic declaration of company goals, values, and long-term vision, typically used for branding and marketing.

5. Do I need a lawyer to draft my LLC purpose statement?

Not always, but consulting an attorney can ensure your purpose statement meets state requirements and protects your business. UpCounsel offers legal assistance for drafting and reviewing LLC formation documents.

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.