Three important lessons for holiday party hosts

Dear Alex:

Our company has historically held an annual holiday party, but this year our office manager is concerned about the potential liability of serving alcohol to our guests and is thinking about canceling the party.Is this a valid concern, and should we cancel the party?

Holiday parties are a fun and important tradition for businesses. Parties can be a great way to show gratitude to employees, to build employee morale, loyalty and camaraderie, and to offer everyone in the company an opportunity to revel in the joy of the season.

Alcohol is frequently served at holiday parties, and for many it is an important part of the holiday tradition. Unfortunately, sometimes guests can overindulge, and despite the host’s best efforts, guests may even drink and drive.

California is one of only a few states that offers protection to private social hosts from liability for the acts of their intoxicated guests. In most states, the host of a party could be liable for an intoxicated guest who causes injuries to others.

In California, however, the legislature enacted laws to protect private social hosts from liability for the actions of their guests in most circumstances. There are certain circumstances in which social hosts are not given liability protection, and in all circumstances, serving alcohol responsibly is an obligation that every social host should take very seriously.

Here are three things to keep in mind when planning a company holiday party:

1. Do not serve drinks to drunken people.

Bars and restaurants that serve drinks to drunken people can be guilty of a misdemeanor. Social hosts do not face criminal implications for providing drinks to an intoxicated person, but hosts have a social responsibility to help prevent accidents or injury to guests, property, and others.

2. Do not allow anyone under the age of 21 to drink.

The age of 21 is not only the minimum legal age for a person to drink, but California’s social host liability protections do not extend to adults who furnish alcohol to underage drinkers. If an underage person is injured, causes injury to another, or worse, the adults responsible for serving the minor may be held personally responsible for the resulting harm.

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3. If you are a social host, do not charge admission or ask your guests to “chip in” to help cover the costs.

Bars, restaurants and other licensees are permitted to charge for drinks, but those licensees are held to a different standard of liability than private social hosts. Social host liability protection may not extend to private social hosts who ask guests to chip in or pay for their drinks.

Court cases in California have held that charging for attendance at a party turned the party into a de facto “nightclub,” and the party host was not afforded the typical social host liability protection.

Most importantly, please be safe and make responsible decisions this holiday season.

Many of the local car services and AAA will offer special promotions during the holidays, and taxis or on-demand car services are always available (even some of the local businesses have apps to call for on-demand cars).

Alex Myers is a business attorney with Myers & Associates in Napa. Reach him at alex@myers-associates.com or 707-257-1185. The information provided in this column is not intended as legal advice, nor does it create an attorney-client relationship. The information is not a comprehensive analysis of the law — if you need legal advice, contact an attorney.

This column originally ran in the Napa Valley Register on November 24th, 2015. You can read it on the Register's website here: "Three important lessons for holiday party hosts"

Back to basics: sole proprietors and general partnerships

In California, not every business is required to form a business entity with the state of California. Individuals, or multiple people working together in partnership who conduct business for profit, are automatically subject to certain laws and legal classifications.

These default laws apply even when those business people have not taken any affirmative steps to register or formalize their business structure or rules of operation.

An individual conducting business without creating a business entity is classified as a sole proprietor; multiple people conducting business together as partners without creating a business entity are classified as general partners.

If one person paints houses for money, and has not filed any business organization documents with the state, that person is a sole proprietor. If two people paint houses together for money, and intend to work as partners, that business is legally classified as a general partnership.

Sole proprietors and general partnerships receive similar default treatment under the law. The individual proprietor or partners are subject to personal liability for activities of the business. For tax purposes, business income is allocated directly to the individuals and so are business losses.

This is called being a “pass-through” entity because money passes right through the business entity directly to the individual business owners; the business itself does not pay taxes but the owners pay taxes on the business’s income.

Sole proprietors do not register their business with the secretary of state. General partnerships may register with the secretary of state, but it is optional. If general partners elect to register with the secretary of state, they file a document called a Statement of Partnership Authority.

General partners are “jointly and severally” responsible for the obligations of this business. This means that all of the partners are equally responsible for the business’s obligations, or any of them individually could be responsible for the entirety of those obligations. The partners also share business income equally, unless they make an agreement to change the allocations.

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Unlike other business entity types such as corporations and LLCs, sole proprietors and general partnerships do not pay an annual $800 franchise tax to the state of California. Sole proprietors and partners in general partnerships also do not receive the same protections under the law as corporate shareholders or LLC members. The personal assets of a sole proprietor or a general partner can be subjected to the liabilities of the business’s activities.

General partnerships can operate with or without contracts governing the rules of operation of the business. If the partners of a general partnership wanted to memorialize the terms of their arrangement in writing, they would do so with a partnership agreement. Although partners are not required to enter into a partnership agreement, they should. Relying on assumptions or verbal discussions can lead to uncertainties, misunderstandings, and disputes between partners.

Keeping a written record of the agreement of the partners helps reduce those misunderstandings, provide guidance in times of turmoil, set expectations of the partners, and can preserve the positive relationship of the partners.

Alex Myers is a business attorney with Myers & Associates in Napa. Reach him at alex@myers-associates.com or 707-257-1185. The information provided in this column is not intended as legal advice, nor does it create an attorney-client relationship. The information is not a comprehensive analysis of the law — if you need legal advice, contact an attorney.

This column originally ran in the Napa Valley Register on November 10th, 2015. You can read it on the Register's website here: "Back to basics: sole proprietors and general partnerships"