BILL ANALYSIS �
AB 1260
Page 1
Date of Hearing: May 7, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
AB 1260 (Medina) - As Amended: April 30, 2013
SUBJECT : California family owned business.
SUMMARY : Defines a California family owned business and states
the intent of the Legislature to aid and assist the interests of
California family owned businesses. Specifically, this bill :
1)States that it is the intent of the Legislature to enact
legislation that would aid, counsel, assist and protect, to
the maximum extent feasible, the interests of California
family owned businesses in order to preserve free competitive
enterprise and support family owned enterprises.
2)Defines California family owned business to mean "a business
that is independently owned and operated as a privately held
enterprise by members of a family or partnership of families
that maintains its principal office in California, has been in
business for more than 10 years, and meets both of the
following requirements:
a) Strategic influence, including but not limited to being
active in the management, continuing to shape the culture
of the business, or serving as board members or advisors,
is exercised by family members on the management of the
business; and,
b) The business is able to demonstrate continuity across
generations or the intent for continuity across
generations.
3)Makes legislative findings and declarations relative to the
unique and valuable characteristics of California family owned
businesses.
EXISTING LAW:
1)Establishes the Small Business Procurement and Contract Act.
(Government Code (Gov. Code) Section 14835)
AB 1260
Page 2
2)Defines a small business to mean "an independently owned and
operated business that is not dominant in the field of
operation, the principal office of which is located in
California, the officers of which are domiciled in California,
and which, together with affiliates, has 100 or fewer
employees, and annual gross receipts of ten million dollars or
less over the previous three years, or is a manufacturer as
specified." (Gov. Code 14837)
3)Defines a microbusiness to mean "a small business which
together with affiliates has average annual gross receipts of
two million, five hundred thousand dollars or less over the
previous three years or is a manufacturer as specified. (Gov.
Code 14837)
4)Defines a disabled veteran's business enterprise to mean "an
enterprise that has been certified as meeting the
qualifications established by the Section 999 of the Military
Code. (Gov. Code 14837)
FISCAL EFFECT : None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)Purpose of this bill . This bill aims to define a California
family owned business to help to clarify the role of these
businesses in California's economy. By defining a family
owned business, the author believes this bill will help
strengthen the opportunities for these businesses and help
recognize their important contributions to California. This
measure is sponsored by the Family Business Association.
2)Author's statement . According to the author, "research has
shown that family-owned businesses have unique characteristics
that distinguish them from other businesses; however, there is
currently no standardized definition for family-owned
business. A standardized definition is needed in order to
recognize the needs and contributions of family owned
businesses."
3)Family-owned business . A study released by Blue Sky
Consulting Group titled Family Business and Their Impact of
the California Economy found that definitional problems around
the term "family-owned business" provide measurement
AB 1260
Page 3
challenges when trying to assess the full economic benefit of
these businesses. As the report states, "While much research
has been conducted in the past few decades on family
businesses and their impact on the economy, no commonly
accepted definition has emerged as to what exactly constitutes
a family business." Because there is no common definition,
researches outcomes about the significance of these businesses
may vary because of different interpretations of the term.
As noted in Family Business and Their Impact of the California
Economy, "in terms of their impact on the economy, family
businesses represent a considerable share of economic activity
at both the state and national level. While the exact measure
of their contribution varies significantly depending upon the
definition used?[there are] estimates that family businesses
account for approximately 20 to 35 percent of all California
businesses, contribute 20 to 40 percent of the state's [Gross
Domestic Product (GDP)], and provide between 20 percent and 40
percent of the state's jobs."
According to information provided in the Annual Family
Business Survey conducted by Family Enterprise USA, "Family
businesses have a dramatically positive impact on their
communities, and together they are a driving force of the
American economy. Family-owned businesses generate 57 percent
of the GDP in the United States (U.S.), employ 63 percent of
our nation's workforce and are the social stabilizers in most
communities in the country."
4)Business designations in California . Current law recognizes
small businesses, microbusinesses, disabled veteran-owned
business enterprises, and disadvantaged business entities.
However, current law is silent on the definition of a
family-owned business.
If a certified small business or disabled veteran-owned business
enterprise meets specified criteria, as determined by the
Department of General Services (DGS), they are eligible for
certain contracting preferences or opportunities. For
example, certified small business and microbusinesses are
entitled to a five percent bid preference on applicable State
solicitations and are eligible for the State's Small Business
Participation Program, which sets a goal for the use of small
businesses in at least 25 percent of the State's overall
annual contract dollars.
AB 1260
Page 4
As an additional incentive, a non-small business prime
contractor who uses certified small business/microbusiness
subcontractors for at least 25 percent of its net bid price is
eligible for a bid preference of five percent of the lowest
responsible bid when competing against another non-small
business. Furthermore, when applying bidder preferences in
which non-small business bidders may be eligible, certified
small business/microbusiness bidders have precedence over
non-small business bidders.
5)Question for the Committee . This bill attempts to define a
family owned business in California, but does not define what
constitutes "family", nor does it point to any functioning
definition in current law. According to the sponsor, this
bill is intended to be as broadly inclusive in the meaning of
"family" as possible. Nevertheless, the Committee may wish to
inquire of the author and sponsor as to the necessity of
providing a definition to ensure that no one is unfairly
excluded when the term "California family owned business" is
used in the future.
6)Arguments in support . The Family Business Association writes
in support, "[This bill] is a necessary [measure] that sets
out, for the first time in statute, a definition of a family
owned business. [Family Business Association] believes the
definition of a family owned business is important for
California because the family owned businesses are distinct in
many ways from businesses. Importantly, [this bill] will
again let California lead the nation statutorily defining a
family owned business so the decision makers will be able to
consider the special challenges of operating these businesses
when considering future actions."
REGISTERED SUPPORT / OPPOSITION :
Support
Family Business Association (sponsor)
Holt of California
Mape's Ranch and Lyons' Investments
Nor-Cal Beverage Co. Inc.
Opposition
AB 1260
Page 5
None on file.
Analysis Prepared by : Elissa Silva / B.,P. & C.P. / (916)
319-3301