What is a Partnership Amendment?
A Partnership Amendment is an internal written document detailing any changes to the terms of a partnership that were previously documented in a Partnership Agreement.
A partnership is a business arrangement where two or more individuals share ownership in a company and agree to share in the profits and losses of their company. A simple Amendment will identify the following essential elements:
- Partners: the name of each person who owns the company
- Partnership Name: the partnership’s name
- Agreement: the date of the original agreement
- Amended Sections: the specific sections of the agreement being changed
When a Partnership Amendment is Needed
There can be multiple amendments to the original agreement. As a partnership grows and develops, the needs and circumstances of the partnership will naturally change.
Sometimes these changes need to be documented in writing in an Amendment to Partnership Contract.
The roles of the partners may change, additional investments may be made, or the partners may decide that they need new or more specific provisions to govern their partnership.
Consequences of Not Using a Partnership Amendment
Without a written Partnership Amendment, either the original Agreement or your state’s default partnership rules will apply.
For example, if the profits and losses of the partnership are currently shared equally, but a partner makes an additional capital contribution and wants to have a larger share of the profit, a written Partnership Amendment needs to be executed.
Or if interest was not discussed in the original agreement, the state may automatically provide for interest on that additional capital contribution.
If the partners prefer not to pay interest, an addendum allows them to dictate how events not contemplated in the original agreement will be handled.
Nearly every state has adopted the Uniform Partnership Act (1914) or Revised Uniform Partnership Act (1997).
Most Common Amendment Situations
When is it commonly used?
A Partnership Amendment is used whenever there is a change to the original Partnership Agreement or new provisions must be added to the original Agreement. Often this is used when:
- A partner leaves the partnership
- A new partner is added to the partnership
- To change the distribution of profits and losses
- A partner contributes additional capital
- The partners adopt new accounting and oversight policies
- The partnership changes its banking institution
An Amended and Restated Partnership Agreement is an agreement that has been changed one or more times (amended) but now appears in its entirety with the amendments incorporated (restated).
What Should Be Included?
A simple Partnership Amendment should generally have at least the following:
- Who are the original partners
- What provisions are being changed or amended
- Where is the partnership’s business located
- When will the amendment go into effect
- How many other amendments have there been
Here are some other useful details to include:
Counterparts: the amendment may be signed in one or more counterparts
Governing Law: which state’s laws will apply if there is a dispute
Original Agreement: unless otherwise modified, the original agreement remains in full force and effect
Be sure to attach or file any Partnership Amendments with the original agreement.
Partnership Amendment Sample