What a Practice “Business Divorce” Actually Means

“Business divorce” is the informal term for the separation of co-owners of a business. In a healthcare practice, that usually means physicians, dentists, or other licensed practitioners who jointly own a professional entity and no longer want to continue together. The legal path depends on how the practice is organized and what the founding documents say. The most common structures in New York are the Professional Service Limited Liability Company (PLLC) and the Professional Corporation (PC) — entities that, under New York law, may only be owned by licensed members of the same profession. That ownership restriction shapes every part of a separation: you cannot simply sell your share to an outside investor, and a departing owner’s interest has to be dealt with in a way the professional-entity rules allow.

Common Ways Practice Owners Separate

Buyout of one owner by the others. The most common resolution. One practitioner leaves; the remaining owner or owners purchase the departing owner’s interest. The fight is usually about price — how the practice is valued — and terms.

Dissolution of the entire practice. When no one wants to continue, or the relationship is too damaged, the practice is wound down, assets and receivables distributed, liabilities settled, and the entity dissolved. New York has specific procedures for judicial and voluntary dissolution of PLLCs and PCs.

Splitting the practice. In some cases the practice is divided — practitioners take their patients, records, and equipment and go separate ways, sometimes keeping the entity for one side and forming a new one for the other.

Negotiated exit under the operating agreement or shareholders’ agreement. If the founding documents contain a buy-sell provision, a valuation formula, or a dissociation procedure, the separation may be governed by those terms — assuming they were drafted properly and are enforceable.

Judicial dissolution when owners are deadlocked. When co-owners hold equal shares and cannot agree, one may petition the court for dissolution. New York courts can dissolve an entity where the owners are hopelessly deadlocked or where those in control are acting oppressively toward another owner.

Why the Founding Documents Matter So Much

The single biggest factor in how a practice separation goes is what the operating agreement (for a PLLC) or shareholders’ agreement (for a PC) says — and whether it addresses separation at all. A well-drafted agreement will contain a buy-sell provision, a method for valuing a departing owner’s interest, a procedure for voluntary and involuntary withdrawal, and terms for what happens on death, disability, or loss of license. When those provisions exist and are enforceable, they usually control, and the dispute is narrower.

The problem is that many practices were formed with a boilerplate agreement — or no agreement at all beyond the entity filing. When the documents are silent, ambiguous, or were never signed, New York’s default statutory rules and case law fill the gap, and the separation becomes far more contested. Either way, the first thing we do is read the actual documents — because that is what determines the leverage each side has.

Valuation — Usually the Hardest Fight

When one owner buys out another or a practice is dissolved, someone has to put a number on the practice. Valuing a medical or dental practice is more contested than valuing an ordinary small business because so much of the value is tied up in things that are hard to quantify: goodwill, the patient base, referral relationships, payer contracts, and the departing practitioner’s own book of patients. Disputes commonly turn on the valuation date, whether personal goodwill is separated from enterprise goodwill, how accounts receivable are treated, and which valuation method applies. A buy-sell formula in the founding documents can shortcut this fight — if one exists and is reasonable. Where it does not, valuation experts are often involved, and the framing of the valuation question can move the number substantially.

The Healthcare-Specific Issues an Ordinary Business Divorce Ignores

Who may own the practice. Under New York’s professional-entity rules, only licensed practitioners of the same profession may hold an ownership interest in a PLLC or PC. A departing owner’s share cannot be sold to a non-licensee, and the remaining ownership has to satisfy those rules after separation.

Patient records and continuity of care. Patients are not assets to be divided like equipment. New York and federal rules govern custody of medical records, patient notification, and continuity of care when a practitioner leaves. Getting this wrong creates professional and regulatory exposure independent of the business dispute.

Restrictive covenants against practitioners. Non-compete and non-solicitation clauses are enforced differently against physicians and other practitioners than against ordinary employees. New York courts weigh the legitimate protection of the practice against the public interest in patient access to their chosen provider. Whether a covenant is enforceable — and how broadly — is often a central battleground in a practice separation.

Provider enrollments and payer contracts. Medicare and Medicaid enrollments, commercial payer contracts, and credentialing are tied to specific practitioners and entities. A separation has to account for how those move, terminate, or continue.

Malpractice tail coverage. When a practitioner leaves, the question of who pays for tail coverage on claims-made malpractice policies is a real and often-overlooked financial term of the separation.

Regulatory filings. Changes in practice ownership can trigger filing obligations and, in some cases, notice to regulators. These are easy to miss when the focus is on the money.

When the Dispute Turns Into Litigation

Most practice separations settle. Some do not. When one owner is being frozen out, when practice funds are being diverted, when a partner is competing against the practice while still an owner, or when the parties are simply deadlocked, litigation may be necessary — a dissolution proceeding, a claim for breach of the operating or shareholders’ agreement, a breach-of-fiduciary-duty claim between owners, or an action to enforce or invalidate a restrictive covenant. We handle these disputes with an eye toward resolution, but prepared to litigate where the other side leaves no choice. See our litigation practice for how we approach contested matters.

How Our Office Helps

We start by reading the founding documents — the operating agreement or shareholders’ agreement, the entity filings, and any buy-sell or employment agreements — because those determine each side’s leverage. We identify your goal: do you want out, do you want to keep the practice and remove someone else, or do you want to wind the whole thing down? We map the healthcare-specific issues that an ordinary business lawyer would miss — professional-entity ownership rules, patient records, restrictive covenants, provider enrollments, tail coverage. We work toward a negotiated separation where possible, because a negotiated exit is almost always faster, cheaper, and less damaging to the practice’s value than litigation. And where the other side will not deal reasonably, we are prepared to pursue dissolution or the appropriate claims in court. Attorney Cook’s combination of business, healthcare, and litigation experience means the business terms, the regulatory overlay, and the litigation posture are evaluated together rather than in separate silos.

What to Think About Before You Call

You don’t need everything organized to call. But these questions will come up:

How is the practice organized — PLLC, PC, partnership, something else? How many owners are there, and what are the ownership percentages? Is there a signed operating agreement or shareholders’ agreement, and does it address buyout, valuation, or withdrawal? What is your goal — leave, remove another owner, or dissolve? Is there a non-compete or non-solicitation clause in play? Are practice funds, patient records, or referral relationships already being affected? Is anyone already threatening litigation, or has anyone stopped communicating? Roughly what is the practice worth, and is there an existing valuation or buy-sell formula?

Bring the governing documents if you have them — they are the most important thing. If you don’t have them handy, call anyway; we can work through where you stand.

Frequently Asked Questions

What exactly is a “business divorce”?

It is the informal term for co-owners of a business separating — one buying out another, splitting the business, or dissolving it entirely. In a medical or dental practice, it means licensed practitioners who own a practice together deciding to go their separate ways, and doing it in a way that satisfies both the business terms and the healthcare-specific rules.

We don’t have a written agreement. Can we still separate?

Yes, but it is harder and more contested. When there is no operating agreement or shareholders’ agreement — or the one you have is silent on separation — New York’s default statutory rules and case law fill the gap. That usually means more negotiation and, in deadlock situations, sometimes a judicial dissolution proceeding. The absence of an agreement is exactly when experienced counsel matters most.

Can I be forced out of my own practice?

It depends on the ownership structure and the governing documents. Owners with majority control have more leverage; equal owners can reach deadlock, which may lead to a dissolution proceeding. If you are being frozen out, having practice funds diverted, or pressured to leave on unfair terms, you may have claims — including for breach of fiduciary duty or oppression. Do not agree to an exit under pressure before understanding your position.

What happens to the patients and their records?

Patients are not property to be divided. New York and federal rules govern custody of records, patient notification, and continuity of care when a practitioner leaves a practice. This has to be handled correctly — independent of the money — because getting it wrong creates regulatory and professional exposure that outlasts the business dispute.

Is my non-compete enforceable if I leave?

Restrictive covenants are enforced differently against physicians and other practitioners than against ordinary employees. New York courts balance the practice’s legitimate interests against the public interest in patients’ access to their chosen provider. Enforceability turns on the covenant’s scope, duration, geography, and the specific facts. Whether yours holds up — and how broadly — is often a central issue in the separation.

How is the practice valued?

If your governing documents contain a buy-sell formula, that may control. If not, valuation is often the hardest-fought issue, because so much of a practice’s value is goodwill, the patient base, and referral relationships. Disputes turn on the valuation date, whether personal goodwill is separated from enterprise goodwill, how receivables are treated, and which method applies. Valuation experts are frequently involved.

Do we have to go to court?

Usually not. Most practice separations settle through negotiation, which is almost always faster, cheaper, and less damaging to the practice’s value than litigation. Court becomes necessary when owners are deadlocked, when one side is acting in bad faith, or when someone’s rights are being violated. We work toward a negotiated resolution but are prepared to litigate when the other side leaves no choice.

Why Choose Ronald S. Cook, P.C.

Attorney Ronald S. Cook holds a J.D., dual LL.M. degrees, and an MBA, and has practiced in New York for over 25 years. He is a 2025–2026 New York Super Lawyers selectee. A medical practice separation sits at the intersection of business law, healthcare regulation, and litigation — and the MBA background means the valuation and financial terms are understood, not just the legal ones. Most business lawyers miss the healthcare overlay; most healthcare lawyers are not litigators. Evaluating all three together is what protects both the deal and your license.

Attorney Cook is also the author of several books on law and finance, available on Amazon.

Resolve the Dispute Before It Damages the Practice

Every month a practice dispute festers, patients, staff, and value walk out the door. The sooner you understand your position and your options, the more leverage you have to protect what you have built. An honest conversation about your situation costs you nothing.

Call to discuss your situation: (888) 275-2620. Available 24/7. Or text (631) 678-8993.

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Last reviewed by Attorney Ronald S. Cook — July 2026

This page is for informational purposes only and does not constitute legal advice. Prior results do not guarantee a similar outcome. Outcomes depend on the specific facts of each matter, including the governing documents and the practice structure.