Thursday, October 8, 2020

The Purposeless Purpose Clause


The Purposeless Purpose Clause

      Every business organization act allows there to be defined what is the purpose of the company. All too often, something entirely generic and unspecific such as “The Company is formed for any valid business purpose” or “The purpose of the company is to engage in any business activity permitted a limited liability company formed under the Kentucky Act.” is utilized. Doing so is, essentially, a waste of perfectly good ink. By saying the company can do anything, essentially no information is conveyed.

      Peter Mahler, in his blog New York Business Divorce, recently published a posting titled The Purposeless Purpose Clause Rides Again (Sept. 28, 2020). Therein, Peter reviewed the decision rendered in Lazar v. Attena, LLC, 2020 NY Slip Op 33003(u), 2020 WL 5439528 (Sup. Ct. NY County Sept. 9, 2020), in which those words had the effect of rendering an application for judicial dissolution of an LLC ineffective. HERE IS A LINK to that posting, which I obviously recommend to you.

      In addition, and several years ago, I wrote an article in the Journal of Passthrough Entities addressing this same topic, namely, Purpose: If You Don’t Know Where You Are Going, How Will You Know If You Have Arrived, 20 J. Passthrough Entities 37 (Nov./Dec. 2017). HERE IS A LINK to that article.

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