Divorce can bring significant financial and legal challenges, especially when a medical practice or small business is involved. If a business was started or grew during the marriage, it may be considered marital property under Illinois law. This means both spouses might have a claim to a portion of the business. The question of whether to buy out your spouse’s interest is a critical decision that requires careful analysis. Illinois courts look at various factors, including each spouse’s role in the business, the business’s value, and its impact on the marital estate. A buyout can be an effective way to retain full control of the business while ensuring a fair division of assets. However, determining the right buyout structure and valuation is essential to avoid financial strain and legal complications.
Under 750 ILCS 5/503, Illinois follows the principle of equitable distribution. This means that marital assets, including business interests, are divided fairly, though not always equally. If a business was started during the marriage or if marital funds contributed to its growth, it may be subject to division. Even if one spouse did not actively participate in running the business, they could still be entitled to a portion of its value.
Illinois courts consider several factors when deciding how to divide a business, including:
If both spouses are involved in the business, they may consider continuing as co-owners. However, this arrangement is often impractical. A buyout allows one spouse to retain full ownership while the other receives compensation for their share.
A buyout begins with determining the fair market value of the business. Illinois law allows for different valuation methods, including:
In many cases, financial experts or forensic accountants are needed to assess the business’s true worth. The valuation process is often a point of contention, as one spouse may argue for a lower valuation to reduce the buyout cost while the other seeks a higher value.
Once the business’s value is established, the buyout can be structured in different ways:
The right structure depends on the financial situation of both parties and the ability of the business to sustain payments.
A buyout must be handled carefully to avoid tax consequences, cash flow issues, and legal disputes. If one spouse disagrees with the valuation or terms, litigation may be necessary to resolve the matter. Additionally, non-compete agreements may be required if the departing spouse was involved in the business to prevent them from opening a competing practice or company.
Yes, if the business is considered marital property under 750 ILCS 5/503, your spouse may have a claim to its value. Even if they were not actively involved, marital funds or other contributions may justify an equitable division.
Business valuation depends on financial records, cash flow, assets, and industry comparisons. Courts often rely on financial experts to determine an accurate market value.
A prenuptial or postnuptial agreement can protect a business from division. If no agreement exists, keeping business finances separate from marital funds and maintaining clear records of ownership and contributions can help.
If a lump-sum payment is not possible, installment payments or trading other assets may be options. Courts consider financial ability when approving a buyout structure.
While Illinois courts do not typically force a business sale, if a buyout is not financially viable and other assets cannot offset the value, selling may become necessary.
Each spouse may hire separate valuation experts, and if they disagree, the court may decide on a fair value based on presented evidence.
A non-compete agreement may be included in the buyout to prevent the departing spouse from starting a competing business, especially in professional fields like medicine or law.
If both spouses are listed as co-owners, the court may evaluate whether one spouse can buy out the other or whether selling the business is the best option.
Illinois courts can award a percentage of the business value to a spouse, but they do not typically order joint ownership unless both parties agree.
If you are facing a divorce and own a medical practice or small business, protecting your financial interests is critical. A buyout may be the best way to retain ownership while ensuring a fair division of marital assets. At Gordon & Perlut, LLC, we help business owners navigate complex divorce issues and secure outcomes that protect their livelihood.
If you have questions about your options, contact our Chicago divorce attorney at our Chicago office at 312-360-0250 or our Skokie office at 847-329-0101 to arrange a free consultation. We represent clients throughout Chicago.