The Purpose of an LLC
The purpose of an LLC, or limited liability company, is to protect the business owner from personal accountability for the obligations of the firm. It provides personal liability protection for its members. This means if the business owes money or gets sued, the member’s personal assets are protected.
Writing a Purpose Statement
A good purpose statement should outline the primary business activities your LLC will engage in. Depending on your state regulations, your purpose statement may need to be either generic or specific. For example, you might craft a purpose statement such as “The purpose of [Company Name] is to offer consulting services to businesses in the [Industry] industry” or “The purpose of [Company Name] is to manufacture and distribute [Product] to customers in [Location]”.
Articles of Formation and Amendments
An LLC is governed by articles of formation, also called certificates of formation or articles of organization. When forming an LLC, include a purpose statement in the formation documents describing the reason or purpose for which the company was initially founded and what makes it unique. You can change your purpose statement at any time by filing an amendment.
State Regulations for Purpose Statements
Most states’ Articles of Incorporation and Articles of Organization require a purpose statement briefly explaining what business activities the company is requesting legal approval to conduct in the state. Some states ask for:
- A "statement of lawful purpose" – Generally generic.
- A "statement of specific purpose" – Providing a more detailed description of the business activities the company will participate in.