Key Takeaways

  • A corporate purpose is a required statement in Articles of Incorporation that explains the business activities a corporation will engage in.
  • Most corporations use the broad phrase “corporate purpose is any and all lawful business” to maximize flexibility for future activities.
  • Some states allow or require a specific purpose statement, while others accept the general clause without issue.
  • A well-drafted purpose statement can influence compliance, contracts, and even tax or licensing requirements.
  • Corporations may amend their Articles if they later wish to narrow, expand, or clarify their business purpose.
  • Corporate bylaws and shareholder agreements often add practical detail to how the stated purpose is carried out.

A corporate purpose is any and all lawful business. This is the purpose that you will list in your company's Articles of Incorporation. You can list a more specific corporate purpose if you want, but doing so is not required.

Forming Your Corporation

Corporations are formed by filing Articles of Incorporation with your Secretary of State. If you want your Secretary of State to approve your Articles and the formation of your corporation, you should be sure to include the correct information.

The name of your corporation is the first thing that you need to list in your Articles of Incorporation. Your name should be unique from other registered business names in your state. Make sure you aren't filing under the same name as another business by having your attorney perform a business name search. Next, you will need to state how long your corporation will exist. Because corporations are legally distinct entities, they can exist in perpetuity.

Next, list the purpose of your corporation. Include a statement that your corporate purpose is any and all lawful business. Your Articles of Incorporation must include information about your company's stock. You should state how much common stock your company plans to issue and specify the par value of each stock. You also have the ability to grant your shareholders preemptive rights to treasury shares that have not yet been issued.

Other information you should add to your Articles of Incorporation includes:

  • The name of your registered agent. You should also include your registered agent's business address.
  • The names of your initial company directors.
  • Contact information of your incorporators.

The biggest advantage of corporations is the limited liability protections enjoyed by company owners. With a corporation, you will also be able to write off certain bills on your taxes, including dental bills, disability insurance, and benefits programs.

General vs. Specific Purpose Statements

When drafting your Articles of Incorporation, you may choose between a general purpose statement and a specific purpose statement.

  • General Purpose: The phrase “corporate purpose is any and all lawful business” is widely accepted and ensures your corporation can engage in any legal activity without needing amendments later. It provides the greatest operational flexibility and avoids limiting the company’s ability to expand into new markets.
  • Specific Purpose: Some corporations opt for a narrower statement (e.g., “to operate a restaurant” or “to provide IT consulting services”). While this can clarify the company’s focus to investors or regulators, it may require amendments if the corporation later diversifies.

Certain industries—such as banking, insurance, or professional corporations—may require more detailed descriptions of services, and some states mandate specific wording. Before filing, check your state’s corporate statutes or seek legal guidance.

Handling Corporate Documentation

Corporations and limited liability companies (LLCs) are the two most common types of business entities. The formation documents for these two entities are very similar, but have different titles. To form a corporation, you must file Articles of Incorporation, and to establish an LLC, you must submit Articles of Organization. Both organizations also have documents that govern how the business is run. For a corporation, this governing document is called its bylaws, and for an LLC, the governing document is called an Operating Agreement.

The Articles of Incorporation includes basic information about a company, including the purpose for its formation. Because most companies simply list their purpose as lawful business, many people view this section of the Articles of Incorporation as perfunctory. If a corporation decides to issue additional shares of stock or wants to change its name, the Articles of Incorporation must be amended. Authorizing shares does not indicate the corporation's ownership. After authorization, the corporation would still need to issue these shares.

Corporate bylaws are almost as important as Articles of Incorporation. The bylaws function as a corporation's constitution, outlining how the business will be operated. With your bylaws, you can designate the location for your corporate offices, the rights of your shareholders, and what your officers and directors can do within the company. You can also outline how many shareholders are necessary for a quorum.

Stockholders are the actual owners of the corporation, but they generally are not involved in the business's daily operations. Instead, officers and directors will be responsible for running the business and will need to regularly meet to discuss these operations. Officers usually have the most involvement in the organization, as they are also employees of the business.

When you are drafting your corporate bylaws, you must give a great deal of consideration to how you want your business to be run. If you overlook this important fact, your bylaws may end up being too restrictive.

After forming your company, you need to hold an initial meeting of your shareholders. During this meeting, shareholders will approve your Articles of Incorporation and will also elect a board of directors. You can also discuss and adopt your bylaws during this meeting. The issuance of company shares will also be authorized during this meeting.

Importance and Legal Implications of the Purpose Clause

Although many view the purpose clause as a formality, it can have meaningful consequences:

  • State Compliance: Some states (such as Florida) explicitly require that the Articles state the purpose of the corporation, though they often accept the broad “lawful business” clause.
  • Contracts and Licensing: Lenders, licensing boards, and government agencies may review the purpose clause when evaluating eligibility for loans, permits, or regulatory approvals.
  • Legal Standing: In rare cases, if a corporation acts outside its stated purpose, it may be accused of operating ultra vires (beyond its powers). While most modern statutes protect corporations from being dissolved solely for this reason, it can still arise in shareholder disputes.
  • Amendments: If your corporation later changes direction, you can file an amendment to revise the purpose clause. This is common when expanding into regulated industries or international operations.

Including “any and all lawful business” in your corporate purpose helps ensure compliance while reducing the likelihood of having to amend your Articles in the future.

Frequently Asked Questions

  1. Why do most corporations state their purpose as “any and all lawful business”?
    Because it provides maximum flexibility to engage in any legal activity without having to amend Articles of Incorporation if business activities expand.
  2. Are there cases where a specific corporate purpose is required?
    Yes. Some states or industries (like financial institutions, nonprofits, or professional corporations) require specific wording about the business’s services.
  3. Can a corporation change its stated purpose later?
    Yes. Corporations may file amendments to their Articles of Incorporation to revise or expand their purpose.
  4. Does a purpose clause affect taxes or licensing?
    Indirectly. Licensing agencies and regulators may review the stated purpose when granting approvals, and certain tax-exempt organizations must define a charitable or nonprofit purpose clearly.
  5. What happens if a corporation acts outside its stated purpose?
    While modern laws limit penalties, actions beyond the stated purpose can still cause disputes with shareholders or regulators and may affect the enforceability of contracts.

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