BILL ANALYSIS �
AB 1260
Page 1
GOVERNOR'S VETO
AB 1260 (Medina)
As Amended June 18, 2014
2/3 vote
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|ASSEMBLY: |76-0 |(January 30, |SENATE: |34-0 |(August 11, |
| | |2014) | | |2014) |
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|ASSEMBLY: |74-0 |(August 18, | | | |
| | |2014) | | | |
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Original Committee Reference: B., P. & C.P.
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, or is a
partnership of business entities owned by related persons;
b) Maintains its principal executive office in California;
c) Has been in business continuously for more than 10
years;
d) One of the following conditions apply:
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,
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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; and,
f) Demonstrates an intent to continuously operate as a
family owned business in the future through any of the
following means:
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 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
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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."
6)Makes legislative findings and declarations relative to the
unique and valuable characteristics of California family owned
businesses.
The Senate amendments :
1)Clarify that a California family owned business can be
organized as a partnership of business entities owned by
related persons.
2)Clarify that a California family owned business can include a
partnership of business entities owned by related persons
domiciled in California who hold a majority of the equity
interests.
FISCAL EFFECT : None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)This bill would simply create a formal definition for a
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"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)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)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
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% and 40% 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
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accepted definition has emerged as to what exactly constitutes
a family business."
4)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."
There is no opposition on file
GOVERNOR'S VETO MESSAGE :
"Family-owned businesses have an important role in our state and
local economies and I am supportive of efforts that recognize
their vital contributions. I am concerned, however, that adding
a definition of "California Family Owned Business" in statute
with no legal or programmatic purpose will not achieve the
bill's intended purpose."
Analysis Prepared by : Hank Dempsey / B., P. & C.P. / (916)
319-3301
FN: 0005710