LLC Formation Purpose: In-Depth Guide (+Examples)
The articles of organization is integral in forming a limited liability company, it is the primary document necessary to register your business entity.
Apart from the basic information regarding the LLC, some states require a business purpose statement.
Since I've been in the formation industry for over a decade, I assisted several individuals in establishing their businesses. Together with our team of legal experts, we'll share our insights on how to properly create a business purpose statement.
- A business purpose statement conveys the primary reason your limited liability company was formed.
- The statement establishes commitment, service, and business integrity that distinguishes your company from the rest of the industry.
- According to recent research, 63% of global consumers prefer to purchase products and services from companies that stand for a purpose.
- I encourage new business owners to incorporate a purpose statement in their articles of organization to keep the company in track, compliant, and professional.
What is an LLC Business Purpose Statement
An LLC business purpose statement indicates the primary reason your limited liability company was formed.
It includes the main line of business of the LLC, the target market or clientele, and the manner by which the service or product would be made available.
Why Does an LLC Need a Purpose Statement?
An LLC needs a purpose statement to declare the reason for its formation. These include the activities they are trying to pursue and what legal acts are permitted while running the company.
Most states do not require a purpose statement, but I always recommend to clients to create one due to the following reasons:
- A clear purpose statement will make it easier to communicate your company's goals and objectives.
- Potential investors, clients, or customers are drawn to companies with a clear purpose.
- Knowing what your company may or may not do will help you stay within the boundaries of the law.
A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well. – Jeff Bezos, Founder and executive chairman of Amazon
How Do You Write a Purpose Statement for an LLC?
To write a purpose statement for an LLC, consider the primary industry that your company is engaged in and follow the guidelines below:
- Nature of the business: A business purpose statement must distinctly define the nature of your LLC's primary industry. Indicate the main service or product that the company will provide.
- Operating structure: I inform clients to include the operational methods by which their LLC will provide services or products to their target market.
- Clientele: The purpose statement should also indicate the client base that your company intends to cater to, in relation to your LLC's primary line of business.
- Draft the business purpose statement: Finally, I make it a point to draft a concise but complete business purpose statement that covers the basic components that best define my client’s company.
Examples of a Business Purpose Statement
Here are a few examples of purpose statements depending on the line of business:
- Whole Foods: "Our deepest purpose as an organization is helping support the health, well-being, and healing of both people - customers, Team Members, and business organizations in general - and the planet."
- Kellogg's: "Nourishing families so they can flourish and thrive."
- Lego: "To inspire and develop the builders of tomorrow ."
- The Red Cross: "To protect life and health and to ensure respect for the human being."
- Southwest Airlines: "Connect people to what's important in their lives through friendly, reliable, and low-cost air travel."
Can You Change the LLC Purpose?
You can change the LLC purpose. However, you should make sure that the new purpose is still relevant to your company's mission and goals.
Do I need to contact the IRS when my LLC purpose changes?
You do not need to contact the IRS when your LLC purpose changes, but the agency has to be informed if the company structure is altered and the tax status is affected.
LLC Formation Purpose Explained
LLC Formation Purpose is a document that explains the reasons behind forming a specific business. This document is a description of what a company does.
The LLC Formation Purpose clarifies why you're starting a specific business and describes what the company does. If you're unsure, get help from online legal experts to improve your document confidently.
If you have any doubts about creating one or improving it, you can always contact legal experts online when starting your LLC to help you shape it or reshape it a bit.