Most small businesses operate as sole proprietorships. When business owners decide they want to legally protect their personal assets and obtain additional tax deductions, they often turn to the corporate structure. When you decide to form a corporation, the instructions or articles refer to the "general purpose" of your newly formed corporation. You must specify your corporation's general purpose.

General Objectives

When you incorporate, you must specify your corporation's general objectives in the articles of incorporation. This requirement applies whether your corporation is a nonprofit or for-profit company. Some states allow your business purpose to be very general, while others require more specifics. Nearly all states require greater specificity for nonprofits, because adherence to this specificity is one way companies maintain their nonprofit status at the state level.

Benefits of Being Vague

As your corporation’s general purpose, you can list the general business activity it will engage in. Small businesses often form to do one activity but then change their focus after a year or two due to market conditions, new opportunities or customer requests. Therefore, you may prefer to keep your corporation’s purpose more general. For example, if your corporation operates as a retailer, you can list its purpose as "to sell clothing and accessories" instead of "to sell high-end women's clothing." This allows you to switch to men's clothing without needing to amend your articles of incorporation.

The Catchall Phrase

If you or your co-founders are unsure about the products and services your firm will ultimately provide, you can opt for an even broader, catchall general purpose. You can also use a broader general purpose if you envision a change or expansion of products and services in the future. For example, you can state your corporation’s purpose as "to conduct and transact business as a services business under the laws of X state." If your state requires a more specific purpose, your secretary of state will likely reject this purpose, but in most states, this broadness works fine.

When to Be Specific

If you are sure what type of business or activity your company will engage in, you can be highly specific. For example, your stated purpose may be "to sell automotive after-market parts to consumers and auto-body shops." Choose the purpose that best fits your corporation's immediate, mid-term and long-term needs and intentions. If you use a common name, being specific can help you if a name dispute arises. For example “Taylor Electric” for an electrical contracting service provider may carry more weight than “Taylor Corp.” for a company with the purpose of “providing services in the state of X.”