Does an LLC Need a Business Purpose?
When you form a limited liability company, many states will require you to include a statement about its "business purpose." This statement is not meant to be a comprehensive report on your business goals and commercial aims. It is there primarily to establish the legal standing of the company.
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Statement of Purpose
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When you file the required articles of organization with your state, the simple form may include a box for you to give the LLC's business purpose. Often, however, the box isn't empty. The form may already include a general statement that the company is being formed to conduct "all lawful business." The best advice is to leave the statement as is. If you add language to this statement giving details of your company's aims, you unnecessarily constrain the LLC's future activities if it take an unanticipated new direction.
Lawful Business
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State statutes have some restrictions on what businesses an LLC can lawfully engage in. It cannot conduct business in banking or insurance. It generally cannot conduct business in services provided by certain licensed professionals such as lawyers, doctors or accountants.
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Professional Service LLC
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While the statutes covering LLCs prevent them from engaging in licensed professional services, some states provide a separate version of the LLC, the professional services LLC, in which all members are licensed professionals in the services being provided by the company. When filing articles of organization for a PLLC, you will need to state the profession or professions offered by the company. Specific requirements and professions vary by state.
Limited Purpose
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You can form an LLC with a limited or special purpose in order to attract commercial lenders for a specific project. It's a tool often used by real estate developers to enhance the prospects of financing by allowing lenders to judge the potential profitability of single project without having to consider the potential of a company moving into other endeavors that may not be as profitable. But even in those instances, the special purpose need not be written into the articles or organization when the company is formed. Instead, you can include provisions for the special purpose in the company's operating agreement, with a prohibition against amending the agreement without the lender's consent. That still gives you an easier option to change the agreement if situations warrant or after a loan is repaid.
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