BILL ANALYSIS Ó
AB 1430
Page 1
ASSEMBLY THIRD READING
AB
1430 (Cooper)
As Amended March 26, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
|----------------+------+----------------------+----------------------|
|Business & |14-0 |Bonilla, Jones, | |
|Professions | |Baker, Bloom, Burke, | |
| | |Chang, Dodd, Eggman, | |
| | |Gatto, Holden, | |
| | |Mullin, Ting, Wilk, | |
| | |Wood | |
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SUMMARY: Provides a definition for a "California family owned
business." Specifically, this bill:
1)Defines a "California family owned business" as a business that
meets all of the following requirements:
a) Is organized as a privately held business by one
individual or two or more related persons, or is a
partnership of business entities owned by related persons;
b) Maintains its principal executive office in California;
c) Has been in business for more than 10 continuous years;
d) One of the following apply:
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i) Is owned by a sole proprietorship;
ii) Is a business entity owned by one individual or two or
more related persons domiciled in California who hold a
majority of the equity interests; or,
iii) Is a partnership of business entities owned by related
persons domiciled in California who hold a majority of the
equity interests;
e) The business is controlled by one individual or two or
more related persons who exhibit strategic influence and
control of the business by holding the business as a sole
proprietorship or by holding a majority of the voting
interest;
f) Demonstrates an intent to continuously operate as a family
owned business in the future through any of the following:
i) Present ownership by two or more related persons;
ii) A previous transfer of ownership or equity interests
between related persons; or,
iii) Is subject to a written agreement providing for a
future transfer between related persons provided that the
agreement was executed in good faith.
2)Defines "related person" for the purpose of this law as
"including a person who is related by a common ancestor,
pursuant to state and federal law up to four generations. Any
person related by greater than four generations is included if
his or her ownership or operational involvement arose from an
exercise of continuity of generations, as specified. "Related
persons" also includes a parent, stepparent, brother, sister,
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stepbrother, stepsister, half-brother, half-sister, adopted
person, person born out of wedlock, stepchild, foster child,
uncle, aunt, niece, nephew, first cousin, and any person denoted
by the prefix "grand" or "great." A spouse, domestic partner,
and the spouse or domestic partner of any person that qualifies
as a person related by a common ancestor, pursuant to state or
federal law up to four generations, is also included within the
definition of "related persons" and will continue to be included
in the event of the legal relationship being terminated by death
or dissolution.
3)Specifies that the definition of "California family owned
business," as specified above, only applies to provisions in
which the definition is explicitly cross-referenced.
4)Makes findings and declarations relative to the unique and
valuable characteristics of California family owned businesses.
EXISTING LAW:
1)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 average annual gross receipts of $10 million or less over
the previous three years, or is a manufacturer, as specified.
(Government Code (GC) Section 14837)
2)Defines a "microbusiness" to mean a small business which
together with affiliates has average annual gross receipts of
$2.5 million or less over the previous three years or is a
manufacturer, as specified. (GC Section 14837)
3)Defines a "disabled veteran's business enterprise" to mean an
enterprise that has been certified as meeting the qualifications
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established by Military and Veterans Code Section 999. (GC
Section 14837)
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the Family Business
Association. 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."
Background. According to the Family Business Association, "Family
businesses generate 57% of the nation's Gross Domestic Product
(GDP), employ 63% of the workforce and create 75% of all new jobs.
California's 1.4 million family businesses employ 7 million
Californians." However, as noted by the author, there is not a
standard, uniform definition to describe a family-owned business.
According to the study released by the Blue Sky Consulting Group
titled Family Business and Their Impact of the California Economy,
it was reported that "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, a targeted definition that includes only
those businesses most commonly understood to represent family
businesses results in estimates that family businesses account for
approximately 20% to 35% of all California businesses, contribute
20% to 40% of the state's GDP, and provide between 20% and 40% of
the state's jobs."
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In addition, that study found that definitional problems around
the term "family-owned business" provide measurement challenges
when trying to assess the full economic benefit of these
businesses. As noted in the report, "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." An article
titled Family Businesses' Contribution to the U.S. Economy: A
Closer Look in the Family Business Review also noted, "?the even
greater challenge in quantifying family businesses' collective
impact is there is no concise, measureable, agreed-upon definition
for a family business. Experts in the field use many different
criteria to distinguish these businesses, such as percentage of
ownership, strategic control, involvement of multiple generations,
and the intention for the business to remain in the family."
Because there is no common definition, researches outcomes about
the significance of these businesses may vary because of different
interpretations of the term. Currently, a single standard
definition for a "California family owned business" is not
available, nor is there a consistent definition used across all
states or at the federal level for a family owned business. This
bill seeks to codify a definition for "California family-owned
business" in statute; however it does not specify the use for the
definition.
Arguments in Support
The Family Business Association writes in support, "[This bill] is
a necessary bill that sets out, for the first time in state
statute, a definition of a family owned business. Having one
standardized definition will assist policy makers to determine the
effect and impact of policies if they have already agreed on the
definition of Family Owned Business. Additionally, it will assist
in better quantifying the impact of these businesses on the
economy.
"Importantly, [this bill] will again let California lead the
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nation statutorily defining a family owned business so that
decision makers will be able to consider the special challenges of
operating these businesses when considering future actions.
Specifically, having one uniform definition of Family Owned
Business will assist policy makers when implementing specific
policy issues such as tax and estate succession. It will also be
helpful in local jurisdictions who may consider including
'California Family Owned Businesses' in a 'buy local' promotion or
procurement program."
Arguments in Opposition
None on file.
Analysis Prepared by:
Elissa Silva / B. & P. / (916) 319-3301 FN:
0000283