Legal Question in Business Law in California

Re: what does UCC1 mean? is that good to creditor?

"UCC-1" is the name of a form, usually one page but sometimes with many attachments, that (in California) is filled in by a creditor and filed with the California Secretary of State.

UCC refers to the Uniform Commercial Code, a set of statutes adopted in more or less the same language by all 50 states, providing more or less uniform state law governing commercial transactions, including sales, leases, banking, negotiable instruments, secured transactions, etc.

Filing a UCC-1 is more or less equivalent to recording a deed. It is the last step in a series of steps in a big deal. When filed,it is "notice to the world" that the named creditor claims a security interest in certain property of the named debtor. The filing is said to create a "perfected" security interest.

However, keep in mind that the UCC-1 does not, in itself, create the security interest! It is nothing more than notice that a security interest has been created by other documents. In order to have anything you can enforce against the creditor, there must be a separate, legally adequate security agreement in which the debtor agrees, for a consideration, than creditor shall have a security (collateral) interest in the property to secure an indebtedness.

The UCC-1 itself is totally inadequate to protect you. For example, your partner is off base when he talks about "signing" a UCC-1. The UCC-1 form doesn't get signed; I don't think it even has a space for a signature any more. It is the underlying security agreement that must be signed by the parties.

I recommend having a business lawyer prepare, or at least review, the security agreement, and perhaps all your business documents and records. If you are truly a partnership, this review should include making sure you have a written partnership agreement that truly reflects the way you are doing business, or at least reflects the way you should be doing business.