BILL ANALYSIS �
AB 1260
Page 1
ASSEMBLY THIRD READING
AB 1260 (Medina)
As Amended January 29, 2014
Majority vote
BUSINESS & PROFESSIONS 12-0
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|Ayes:|Bonilla, Bocanegra, | | |
| |Campos, Dickinson, | | |
| |Eggman, Gordon, Hagman, | | |
| |Holden, Maienschein, | | |
| |Mullin, Skinner, Ting | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Defines 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;
b) Maintains its principal executive office in California;
c) Has been in business continuously for more than 10
years;
d) Is owned by a sole proprietorship or 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;
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; and,
f) Demonstrates an intent to continuously operate as a
family owned business in the future through any of the
following means:
AB 1260
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i) Present ownership by two or more related persons;
ii) A previous transfer of ownership or equity interests
between two or more related persons; or,
iii) Being subject to a written agreement providing for a
future transfer between two or more related persons
provided that the agreement was executed in good faith.
2)Defines "related persons" for the purpose of this law as
"includ[ing] a person who is related by a common ancestor,
pursuant to state or 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 across generations as described in
[section 1)F) above]. "Related persons" also includes a
parent, stepparent, brother, sister, 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 shall continue to be included in the
event of the legal relationship being terminated by death or
dissolution."
3)Provides that the definition of "California family owned
business" created by this bill may only be applied to
provisions in which it is explicitly cross-referenced.
4)States that "[i]t is the intent of the Legislature to enact
legislation that would aid, counsel, assist, and protect the
interests of California family owned businesses in order to
preserve free competitive enterprise and support family owned
enterprises."
5)States that "[a] business that is owned and operated by
relatives creates a unique business structure that can be
distinguished from other business structures. The purpose of
this legislation is to create a definition for this business
structure in order to provide a framework for the Legislature
to better understand and address the role family owned
businesses play within the California economy."
AB 1260
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6)Makes legislative findings and declarations relative to the
unique and valuable characteristics of California family owned
businesses.
FISCAL EFFECT : None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)Purpose of this bill . This bill would simply create a formal
definition for a "California family owned business." The
author believes that a legal definition will serve as the
basis for better data collection on the contribution that
family owned businesses make to the California economy, and
perhaps facilitate more direct efforts to support and promote
family owned businesses in the state. Recent amendments make
explicit the inclusion of domestic partners in the definition
of 'related persons.' This measure is sponsored by the Family
Business Association.
2)Author's statement . According to the author, "[r]esearch 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 businesses in the California economy . According
to the March 2011 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% of the [Gross Domestic Product (GDP)]
in the United States, employ 63% of our nation's workforce and
are the societal stabilizers in most communities in the
country."
According to a May 2012 study authored by Blue Sky Consulting
Group titled 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
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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 GDP, and provide between 20 percent and 40 percent
of the state's jobs." The report also 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 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."
4)Arguments in support . The Family Business Association (FBA)
writes in support, "AB 1260 is a necessary bill that sets out,
for the first time in state statute, a definition of a family-
owned business. FBA believes that the definition of a family
owned business is important for California because the family
owned businesses are distinct in many ways from other
businesses. ?Importantly, [this bill] will again let
California lead the nation statutorily defining a family owned
business so that decision makers are able to consider the
special challenges of operating these businesses when
considering future actions."
Analysis Prepared by : Hank Dempsey / B., P. & C.P. / (916)
319-3301
FN: 0003028