Santa Cruz Startup Attorneys & Lawyers

What Is a Covenant Agreement Contract?

A covenant agreement contract is a written promise in an indenture or other formal debt agreement. It's between individuals who have promised to do or not do certain activities.

In finance, covenant agreements relate to financial contracts. These include loan documents that outline borrower limits. These limits protect lenders from defaulted borrowers and make up the covenant agreement contract.

Covenant agreements are also known as restrictive covenants or restrictive agreements. They're often used in real estate and commercial land use situations. For example, to avoid competition, someone buying a commercial property might be restricted from soliciting employees from the previous business.

Covenant agreements can cover everything from maintaining employees to the smallest dividend payments. They're most often represented as financial ratios that need maintenance. One example of this is debt-to-as

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How to Form an LLC in Georgia

A Limited Liability Company, or LLC, is a kind of business structure that is owned either by a single person or a group of people who shared limited liability in the business. Basically, by forming an LLC, their personal assets will not be affected in the event the LLC fails or is sued.

To form an LLC in Georgia, you have to start by creating a name. Your name must contain "LLC," "Limited Liability Company,"  "L.L.C.," "Limited Company," "LC," or "L.C." You may use abbreviations such as ‘Ltd,&rsqu

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Start-up companies often hope to attract employees and investors by offering them shares of stock in the company.  There are several different types of stock, but the two most important are preferred stock and common stock.  Founders and employees typically receive common stock. Investors usually receive preferred stock.

Companies may receive tax benefits if they issue both common and preferred stock.

What is Common Stock?

As the name suggests, common stock is the most common type of stock.  When people think of "stocks," they are usually thinking of common stocks. Owners of common stock --

• May be paid dividends, but that is not guaranteed

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What are Startup Costs?

Startup costs are (1) the expenses a business incurs before it is actually operating plus (2) the cash the business will need to pay its recurring operating expenses during the post-launch period when it is generating insufficient cash flow to cover those payables.

A Good Business Plan Is Crucial

The founders of a new business should devote significant time and effort to the preparation of detailed business plan so that the startup costs are not underestimated. A miscalculation in this area can have a variety of bad consequences:

• A delayed store opening or product launch

• Last minute borrowing for startup expenses and working capital at high interest rates

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What is a Most Favored Nation Clause?

Most favored nation startups are new companies that have a most favored nation or MFN clause in agreements with investors. This clause keeps later investors from getting better terms than the first investors, and it's completely different from the clause that involves countries. Most favored nation clauses are terms in many convertible notes. Some clauses make sure all parties in a contract get equal terms. MFNs usually last until the next round of financing, also called an equity round, starts.

Convertible Notes: What Are They?

Convertible notes are loans from investors that convert into equity or stocks when the company reaches prenegotiated milestones. An MFN clause in a convertible note keeps another investor from g

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