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Why Businesses Enter into Security AgreementsSecured transactions are vital to growing a business. Nearly all individuals and organizations need to take on debt at some point, but getting creditors onboard can be a struggle. Security interest provides reassurance to the creditor, who is then more likely to provide much-needed funding for a given debtor. Additionally, the debtor is more likely to obtain a low-interest rate if some form of collateral is available to the creditor. Security agreements play a central role in this arrangement by outlining the terms under which debt can be secured, and what will happen if the debtor defaults.Drafting a Security AgreementAt a minimum, a valid security agreement consists of a description of the collateral, a statement of the intention of providing security interest, and signatures from all parties involved. Most security agreements, however, go beyond these basic requirements. Many include covenants (or obligations of the debtor) and warranties (guarantees). Examples of covenants or warranties could include the following:The property to be used as collateral is currently free of outside liens.The debtor must notify the secured party immediately about changes in address.The debtor must notify the secured party if the property's value decreases or the property is somehow damaged.The property should not be wasted by the debtor.The debtor must keep the property in excellent condition.The property cannot be used in violation of any federal, state, or local laws, or in violation of an associated insurance policy.Once the security agreement is created, it should be attached. To be deemed 'secured,' the agreement should be perfected. These terms are outlined in detail below. Additionally, the agreement should be authenticated, ideally before a notary or witness (or both).Describing CollateralAs mentioned earlier, a security agreement cannot be deemed valid if the collateral is not adequately described. Specifically, descriptions of collateral should not be overly broad or generic. An overly broad description might involve a blanket description or invoke 'all assets' owned by the debtor.In general, descriptions of collateral should "reasonably [identify] what is described.” In the UCC, examples of a reasonable description include:specific listings,quantity of collateral,categories of collateral, anddescription by type.Types of CollateralA variety of tangible and intangible goods can be used as collateral. These include the following goods:Inventory (raw materials held by a business for sale or lease)Farm products (livestock, crops, or other goods produced via farming operations)Fixtures (items such as windows or doors that, if removed from real property, would require extensive reconstruction)Equipment (any goods other than inventory, consumer goods, or farm products)Accession (defined as any good so united with previously mentioned goods that the identity would be lost upon removal)Accounts (such as accounts receivable, promissory notes, or insurance policy proceeds)General intangibles (including some software rights)Some security agreements include a middle ground of sorts: indispensable paper. Not exactly tangible or intangible, this involves any paper that is absolutely necessary for securing the value of tangible goods.Floating liens may also appear in security agreements. This type of security interest may not be in the debtor's possession at the time of the security agreement's creation. A floating lien may involve after-acquired property, proceeds from the collateral's disposition, or future advances.

When founding a startup, there are a few business and startup legal mistakes to avoid.By avoiding these legal mistakes, you can ensure that you don’t fall into the same traps that early-stage startup founders are prone to falling into.Some common startup legal mistakes to avoid include:Failing to protect your intellectual property (IP)There are lots of ways to protect IP, including Patents, Copyrights, Trademarks, Service Marks, Trade Secrets, and Confidentiality Agreements. Covering all your bases using the correct legal method will ensure that no one will steal the ideas that make your startup unique.AS a startup, your most valuable property is most often your IP. You’re building something innovative and your IP is your competitive advantage. If you don’t take all the measures to protect it all at once, at least be sure to do your research and speak to a lawyer so you make a fully informed decision.Not setting agreements in writingIn the haste of trying to get a startup off the ground and gain recognition, too many founders will agree to handshake agreements rather than create legally binding contracts. These agreements can extend from equity agreements to contracts with third parties.If you have done this then you’ve just made one of the biggest startup legal mistakes to avoid, so pay attention.Not creating a founders agreementBy having a founders agreement, you can ensure that your co-founders respect your equity in the startup and abide by agreements that are most beneficial to the business.Most disputes that might arise between founders as to the progression of the startup or the profits of the business can be settled through reference to a comprehensive founders agreement.Not choosing the correct legal form when establishing the companyOne of the biggest startup legal mistakes to avoid is choosing the wrong business structure.It’s important to establish your startup in the most appropriate legal form for tax purposes and to incorporate your business into the correct market.The list outlines the different types of establishments so you can identify what best suits your business and avoid the problems that can arise should you fail to do so.Not having employee contractsEmployee contracts are essential to minimise disputes and make sure that you have committed and hardworking employees to help grow and support your startup.This would specify terms such as working hours, salary, role and leaving requirements and would be legally binding between the employer and the employees, giving both parties security and can be referred to in instances of dispute.Unclear contracts for web developersOne of the most exciting things about the startup world is the use of the newest technology and the development of new forms of technology. After all, Facebook, Instagram and Snapchat were all startups insistent on creating new social media platforms.However, in creating your app, website, or applying a new software you might need to utilise third-party contractors.Not having a comprehensive privacy policyA privacy policy is essential especially in web-based startups to outline to the user what information will be retained by the website directors and what information will never be accessed.Without correctly outlining the nature of your privacy policy, there will be a lack of trust between the user and the startup, opening up your business to time consuming and expensive litigation.Not working with a lawyerThere are alternatives to traditional law firms if you would like to minimise your legal costs. For example, Linkilaw aims to build and support startups by offering legal advice and documentation at competitive prices to cover essential contracts.This is far better than a Do-It-Yourself approach because it’s one of the biggest startup legal mistakes to avoid.If you're unsure about what you or your startup require legally, we offer a Free Legal Session, we'll talk through your business’ needs and answer the questions you may have.Book a session here.

There's quite a few, which I'll mention below.As a side note, if you're looking for an affordable alternative to hiring a traditional lawyer, feel free to check out LawTrades. It's a legal marketplace for affordable on-demand legal help.Next steps after registering as a C-Corp in DECreate corporate bylaws, which are the formal operating rules for your corporation.Hold the first meeting of the board of directors (and have written minutes of this meeting).Prepare and issue stock certificates to shareholders of the corporation to divide ownership interests up.Have an attorney draft a Founder’s Restricted Stock Purchase AgreementRegister your corporation’s stock with the state of incorporation and federally, with the Securities and Exchange Commission (SEC).Complete and file form 83(b) for unvested founder shares.Get a Federal Employee Tax ID Number (EIN) and open a business bank account, separate from your personal account.Get an attorney to draft a Confidentiality and Invention Assignment Agreement to protect your company’s patents and trade secrets.Ask a lawyer about drafting an indemnification agreement.If you hire an advisor, have an advisor agreement drafted by an attorney.Consult a patent attorney if you think your company may have something patentable.If your startup is web-based, get a terms of use and privacy policy drafted.If you plan on hiring employees, have a salary or equity based offer letter drafted by an attorney.If you plan on hiring freelancer developers/artists, have an attorney draft a “work for hire agreement.”Consult a trademark attorney and copyright attorney (if applicable).Hope this helps get you going. Feel free to reach out or check out http://lawtrades.com if you have more questions!