What does filing a UCC mean?

A UCC filing is a form that creditors submit. When a company decides to take out a secured loan, the creditor is required to notify the public of its interest in the company’s assets.

Brad Nakase, Attorney

Email  |  Tel 888-600-8654

What does filing a UCC mean?

The Uniform Commercial Code (UCC) is responsible for creating uniform regulations that are meant to be used by all states. The goal is for all states to be under the same laws – for there to be uniformity. Technically, states or jurisdictions do not have to adopt Uniform Codes. That said, most jurisdictions tend to adopt Unform Codes either wholly o

One of the UCC’s main goals is to unify, or streamline, the rules that apply to business and business contracts. One of the commercial matters that the UCC regulates is UCC filings. UCC Filings directly affect companies, specifically business loans.

When Charlene turned forty, she decided now was the time to follow her passion and fulfill her dream of starting her own stationery store. As an expert in scrapbooking and calligraphy, Charlene felt that she had something unique to offer her community. With her husband’s help, she built her store from the ground up, calling it “Feather and Nib.” However, Charlene decided to make her business a sole proprietorship, which meant that she could not attract investors. While friends offered her money to help with rent and purchasing materials from vendors, the money was not enough to keep the store afloat for long. Charlene knew she would have to get a loan. Though hesitant to do so, Charlene went to the bank to secure a loan for her business. There, Charlene agreed to a small loan, and with her creditor she agreed on a schedule for paying it back. Charlene agreed that if she did not pay back the loan in the time agreed, then she would forfeit the inventory of her store as collateral. After Charlene left the bank, the creditor created a UCC Filing. The filing established the terms of Charlene’s loan and the collateral. One year later, Charlene made good use of the loan and her business is booming. Now that she paid back every cent, the bank removed the UCC Filing from the loan, thereby completing the process.

A UCC filing is a form that creditors submit. When a company decides to take out a secured loan, the creditor is required to notify the public of its interest in the company’s assets. A secured loan is a loan that is backed by collateral. Collateral is financial assets that an individual owns, such as a car or home. These assets can be used as payment in the event the loan is not paid back. The creditor involved in the loan will file a financing statement, which is called a UCC-1 form. This form acknowledges the creditor’s security interest in the collateral.

So, let’s say a small business decides to take out a loan and wants to use its building as collateral. In this case, the creditor would file a UCC-1 financing statement to establish its security interest in the property. The UCC filing ensures that the creditor will be paid or compensated in the event the debtor defaults or goes bankrupt.

In the United States, all creditors use the same UCC-1 form to provide public notice of interests in assets. UCC-1 forms need to be filed in the Secretary of State’s office in the state where the debtor does business. What happens if the business has locations in multiple states? In this case, the UCC-1 form can be filed in more than one state.

Because UCC filings are public information, UCC-1 forms are available for public viewing. If certain parties are interested in a specific company’s debts or obligations, they can perform a UCC search. It is typical for creditors to perform a UCC filings search prior to making a secured loan. Why is this? The creditor wants to make sure that no other lenders have already filed a UCC-1 to establish their interest in the same collateral.

Example: Greg works at Bank A. As a creditor, he has been asked to complete a loan for a business called Cookies4You. The company has listed a factory as collateral. When Greg conducts a routine FCC filings search, he discovers that the company has already taken out a loan with another creditor, and the same factory is listed there as collateral. Cookies4You will need to use other collateral.

Can a UCC filing be removed?

Once a loan has been paid back, it is the responsibility of the borrower to ask the lender to remove the UCC filing. It is important to do this as soon as possible. Until the borrower does this, there will be public information available that suggests the lender has a claim on the borrower’s property. It is therefore best to have this canceled as quickly as possible, and not to tempt fate.

Learn more about: Business | Corporate | Employment Law

Free Consultation

0 + 6 = ?

Characteristics of an Entrepreneur Mindset

An entrepreneurial mindset is determined, creative, resourceful, and resilient in the most adverse circumstances. An entrepreneur mindset is often positive thinking and comfortable with discomfort.

How To Start Drive Through Coffee Kiosk

Learn steps to start a drive-thru coffee stand begins with a concept or theme on what the coffee kiosk will look like to the public. Then, you must draft a business plan on how the drive through coffee stand will succeed.

What are the components of a marketing plan?

A marketing plan is a strategic outline businesses use to organize, execute, outreach to specific customers, and track their advertising strategy based on a schedule that includes weekly, monthly and yearly activities.

How to transfer LLC ownership?

Two common ways to transfer LLC ownership are to conduct a partial sale to a third party or sell your entire LLC to a third party.

Why Do Companies Incorporate in Delaware?

The State of Delaware offers companies lenient tax benefits and liability protection. Also, companies that incorporate in Delaware do not have to do business in the state.

What Is Business Communication?

Business communication is exchanging information between employees within the workplace and people outside a company.

What Does a Business Lawyer Do?

A business lawyer provides legal services and educates companies on legal matters, including litigation, best practices, applicable laws, creating legal documents, business formation, conflict resolution, business dealings, business transactions, and best business practices.

Inc vs. LLC

Incs. is short for incorporated, and LLC is short for Limited Liability Company. For Inc., where the owner elected to be an S corporation, the profit and loss are passed to its shareholders, whereas income and loss in an LLC flow through to the members.

Compare LLC and Inc.

An Inc. is short for incorporated and an LLC stands for a limited liability company. Both protect company owners from personal liability for business obligations.

How to Start an LLC in California

To start an LLC in California, you may hire a lawyer or do it yourself by going to the Secretary of State's website and registering your business as an LLC by filing the Article of Organization and following the instructions.

Can Two Businesses Have the Same Name?

It depends. If the business name is a registered service mark or trademark, another business cannot have the same name because it violates trademark law. You must perform a three-part test if the business name is not a registered service mark or trademark.

Material Breach of Contract

A material breach of contract occurs when a party fail to perform a contract's terms making the primary purpose of the contract not met, the breach is considered material.

What Type of Business Is a Partnership?

A partnership is the simplest business structure where two or more people are owners of a business. The types of business partnerships include general partnership, limited partnership, and limited liability partnership.

What Is Company Culture?

A company culture is how things get done in the workplace. Company culture can more be described as core values or operating principles used to set the tone for the company's overall operations and success.

What is a sole proprietorship?

A sole proprietor is someone who owns an unincorporated business by himself or herself. A sole proprietorship is a business that can be owned and controlled by an individual.

Sole Proprietorship vs. LLC

Sole proprietorships are popular for self-employed professionals, freelancers, and contract workers, while LLC offers personal liability protection than sole proprietorship.

Is it legal to sell homemade food in California?

Yes, you can sell food from home so long as you have California-required health and food handling permits and business licenses. You must get a permit to sell food from home from the county health department in California. 

See all articles: Business | Corporate | Employment

Characteristics of an Entrepreneur Mindset

An entrepreneurial mindset is determined, creative, resourceful, and resilient in the most adverse circumstances. An entrepreneur mindset is often positive thinking and comfortable with discomfort.

How To Start Drive Through Coffee Kiosk

Learn steps to start a drive-thru coffee stand begins with a concept or theme on what the coffee kiosk will look like to the public. Then, you must draft a business plan on how the drive through coffee stand will succeed.

What are the components of a marketing plan?

A marketing plan is a strategic outline businesses use to organize, execute, outreach to specific customers, and track their advertising strategy based on a schedule that includes weekly, monthly and yearly activities.

How to transfer LLC ownership?

Two common ways to transfer LLC ownership are to conduct a partial sale to a third party or sell your entire LLC to a third party.

Why Do Companies Incorporate in Delaware?

The State of Delaware offers companies lenient tax benefits and liability protection. Also, companies that incorporate in Delaware do not have to do business in the state.

What Is Business Communication?

Business communication is exchanging information between employees within the workplace and people outside a company.

What Does a Business Lawyer Do?

A business lawyer provides legal services and educates companies on legal matters, including litigation, best practices, applicable laws, creating legal documents, business formation, conflict resolution, business dealings, business transactions, and best business practices.

Inc vs. LLC

Incs. is short for incorporated, and LLC is short for Limited Liability Company. For Inc., where the owner elected to be an S corporation, the profit and loss are passed to its shareholders, whereas income and loss in an LLC flow through to the members.

Compare LLC and Inc.

An Inc. is short for incorporated and an LLC stands for a limited liability company. Both protect company owners from personal liability for business obligations.

How to Start an LLC in California

To start an LLC in California, you may hire a lawyer or do it yourself by going to the Secretary of State's website and registering your business as an LLC by filing the Article of Organization and following the instructions.

Can Two Businesses Have the Same Name?

It depends. If the business name is a registered service mark or trademark, another business cannot have the same name because it violates trademark law. You must perform a three-part test if the business name is not a registered service mark or trademark.

Material Breach of Contract

A material breach of contract occurs when a party fail to perform a contract's terms making the primary purpose of the contract not met, the breach is considered material.

What Type of Business Is a Partnership?

A partnership is the simplest business structure where two or more people are owners of a business. The types of business partnerships include general partnership, limited partnership, and limited liability partnership.

What Is Company Culture?

A company culture is how things get done in the workplace. Company culture can more be described as core values or operating principles used to set the tone for the company's overall operations and success.

What is a sole proprietorship?

A sole proprietor is someone who owns an unincorporated business by himself or herself. A sole proprietorship is a business that can be owned and controlled by an individual.

Sole Proprietorship vs. LLC

Sole proprietorships are popular for self-employed professionals, freelancers, and contract workers, while LLC offers personal liability protection than sole proprietorship.

Is it legal to sell homemade food in California?

Yes, you can sell food from home so long as you have California-required health and food handling permits and business licenses. You must get a permit to sell food from home from the county health department in California. 

How to Incorporate a Small Business in California?

To incorporate a small business in California, file an Articles of Incorporation with the California Secretary of State's office. After you file the Article of Incorporation, create corporate bylaws, and elect your initial director(s).

6 Steps for Planning a Business Grand Opening

1. Create Goals for the Event, 2. Begin Planning Early, 3. Stick to the Budget, 4. Have the Right Insurance, 5. Advertise Before the Event, 6. Offer Food and Entertainment

10 Facts About Business Before Starting A Business

1) More than 50% of new businesses survive their first year in business. 2) Less than 50% of family-owned businesses are passed to their children. 3) 40% of business experience challenges in the supply chain…

S Corp vs C Corp – Differences and Benefits

The main difference between an S Corp and a C Corp is that for a C Corp, the corporate profit is taxed to the company, and the dividends to the shareholders are also taxed. In contrast, for an S Corp, the profit is taxed to the shareholder but not to the corporation. Generally, small businesses are S Corps, and major companies are C Corps, e.g., Apple, Microsoft, Caterpillar, John Deer, etc.

How to Form a Corporation in California?

To form a corporation in California follow these steps: 1) Write a one page Article of Incorporation, 2) File the Article of Incorporation with the California Secretary of State, 3) Elect corporate board of directors, 4) File Statement of Information with Secretary of State.

What are the benefits of a corporate lawyer?

The are many benefits of hiring a corporate lawyer for your business which includes: avoiding litigation, enforceable contracts, develop employee policies, proper licensing, etc.

What is Commercial Litigation?

Commercial litigation refers to litigation (lawsuit) that involves commercial or business disputes in court between two or more parties.

How to Get Rid of a 50 50 Business Partner.

How to Get Rid of a 50/50 Business Partner. One method to get rid of a 50/50 partner is to file a business partnership dissolution in the state your company was formed to end the partnership.

Personal Assistant Scam

A personal assistant scam typically involves a perpetrator putting out an ad to hire a personal assistant. Then, when the perpetrator purportedly hires the personal assistant, the assistant is asked to buy something with their own money with the promise to be repaid. The perpetuator then disappears after receiving the goods.

Fiduciary Responsibility Definition

A fiduciary responsibility refers to an organization that must put another person’s best interest first. A fiduciary duty is the highest standard of care in law. For example, a lawyer owes a fiduciary responsibility to the clients, a doctor owes a fiduciary duty to a patient, and a trustee owes a fiduciary duty to a beneficiary.

See all articles: Business | Corporate | Employment

© Copyright | Nakase Law Firm (2019)