Divorce for Business Owners in New York: Understanding Valuation, Distribution, and Buyout Options
If you own a small or medium-sized business and you’re facing divorce, you’re probably worried about what’s going to happen to the company you’ve worked so hard to build. The thought of having your business divided, sold, or disrupted can feel overwhelming, especially when that business is not just your income source but also a significant part of your identity and future security.
Understanding how New York handles business assets in divorce, how businesses are valued, and what options exist for distribution and buyouts can help ease your concerns and allow you to make strategic decisions that protect both your business and your financial future. With 150+ years of combined experience helping business owners through divorce, Miller Law Group provides guidance that respects both the legal complexities and the practical realities of keeping your business viable.
Is Your Business a Marital Asset?
For most business owners going through divorce, the business is probably a marital asset subject to distribution. This is true even if you’re the only one who works in the business, even if you started it during the marriage, and even if your spouse never had anything to do with the company.
In New York, marital property includes anything acquired during the marriage, regardless of whose name is on the title. If you built your business during your marriage, the value created during that time is generally considered marital property. Even if you owned the business before marriage, any increase in value during the marriage may be considered marital property subject to distribution.
This doesn’t mean your spouse automatically gets half the business or becomes your business partner. It means the value of the business (or the marital portion of that value) is part of the overall marital estate that needs to be addressed in your divorce settlement. Understanding this distinction is important because it opens up multiple options for how to handle the business in your divorce.
How Businesses Are Valued in Divorce
If your business is a marital asset, the next step is determining its value. Many business owners think their company has no value because they’re the principal, the person who makes all the money. The reasoning goes: “Without me, there is no business, so there’s no value.”
This intuition is understandable, but it’s not quite accurate. Even if it’s just you, there probably is a value to the business, although it might not be as much as you feared. The value might be relatively modest, but it’s rarely zero.
How is a business valued in a divorce? A business is valued essentially by the amount of money that you take from the business, that’s more than you would have to pay to replace yourself, times a multiple. That multiple is probably between 1 and 3, but it could be a fraction depending on the circumstances.
Let’s break this down. First, you determine the total benefit you receive from the business. This includes not just your salary but also distributions, benefits, perks, and personal expenses covered by the business. Then you subtract what it would cost to hire someone to do what you do. The remaining amount represents the true profit or benefit of business ownership beyond just having a job.
That remaining benefit is then multiplied by a factor (usually 1 to 3) that reflects the likelihood that benefit will continue, the stability of the business, client relationships, and other factors that contribute to ongoing value. A well-established business with long-term client relationships and multiple revenue streams will have a higher multiple than a newer business heavily dependent on the owner’s personal reputation.
Does this sound complicated? It is. Business valuation requires analysis of financial records, understanding of the industry, and often professional valuation services. However, it’s not as scary as it might seem initially, and getting an accurate valuation is probably actually in your favor.
Here’s why: businesses are almost never divided equally in New York divorces these days. Courts and parties recognize that operational businesses shouldn’t be split down the middle or forced into arrangements that harm their viability. Instead, the business is valued, and that value is addressed through other means in the overall settlement. So rest assured, getting the business valued is probably actually in your favor and not something you have to be as worried about as you might think.
The Complication of Personal Versus Business Expenses
When you own a small business and you’re getting divorced, it can be actually pretty complicated to sort out where money came from versus where it was spent and allocated. This becomes important for two different aspects of your divorce: business valuation and lifestyle analysis.
Lots of people take money from the business and use that money to pay for personal expenses. This is completely normal and legal, but it complicates divorce analysis. Even your cell phone could be a combined expense, partially personal and partially business. Your kids call you, your friends call you, you order Uber Eats on it, but you also use it for business. And the business probably pays for it.
The same is true for vehicles, travel, meals, home office expenses, and countless other items that serve both personal and business purposes. When you own a business, the line between personal and business expenses often blurs in ways that make perfect practical sense but create analytical challenges during divorce.
So we need to do a few things. One is to sort out what are the personal expenses from the business expenses. This matters for determining the value of the business. How much is the total owner benefit to you when personal expenses are covered by the business? If the business pays $2,000 monthly for your car, that’s part of your total compensation or benefit from the business, even if it doesn’t show up as salary.
It also matters for lifestyle analysis. What are the expenses of your lifestyle when we’re doing the analysis that informs support determinations? If the business has been covering significant personal expenses, those expenses are part of your marital lifestyle even if they don’t show up in your personal checking account.
Working with attorneys who understand business finances and can help sort through these complexities ensures that both valuation and support calculations reflect reality rather than just what appears on tax returns or salary statements.
Options for Distributing Business Assets
The distribution of a business asset could go a couple of different ways, depending on your specific circumstances, the value of the business, other marital assets available, and what makes sense for both parties.
One option is that the non-title spouse could waive their interest in the business. This might happen in favor of a better support package, both child support or maintenance. Essentially, the business owner keeps 100% of the business, and in exchange, the non-owner spouse receives more generous ongoing support or a larger share of other assets.
Another option is that the business gets valued and then the parties find a way to buy the non-titled spouse out of that business. This could happen through offsetting other assets (more on this below) or through a structured buyout over time.
A third, less common option is that maybe the spouse gets a piece of the business. This wouldn’t include voting rights or operational control, but rather a piece of the action so that when the business is monetized or sold, that person will get their share at that time. This approach is less common because it ties the parties together financially long after the divorce, but it can make sense in certain situations, particularly with businesses that aren’t generating significant current income but have strong future potential.
The key is finding an approach that allows the business to continue operating effectively while ensuring fair distribution of marital assets. Through mediation and collaborative processes, Miller Law Group helps business owners and their spouses explore these options and develop solutions that work for both parties without destroying business value in the process.
Structuring a Buyout
If you need to buy out your spouse’s share of the business, there are really two main ways to do that, each with different implications for cash flow and overall settlement structure.
One approach is to offset the business value against other assets. Maybe there’s a real estate asset or some personal property, or an investment account, or maybe retirement assets. If your business is valued at $300,000 and your spouse’s marital share is $150,000, you might keep 100% of the business while your spouse receives $150,000 more in home equity, retirement accounts, or other marital assets.
This approach has the advantage of creating a clean break. Both parties walk away with their respective assets and don’t remain financially entangled. However, it requires having sufficient other assets to offset the business value, which isn’t always the case, particularly for younger couples or those whose primary asset is the business itself.
Another way is a buyout over time. When there’s a buyout over time, usually there’s interest involved. Why? Because otherwise the non-title spouse’s share would decrease in value over time. Over time, a dollar loses value due to inflation and lost investment opportunity. If you’re paying your spouse $150,000 over five years, the final payment is worth less in real terms than the first payment.
To address this, parties work out an interest rate that is appropriate to the situation. This might be a simple interest rate applied to the declining balance, or it might be a more complex calculation depending on the payment structure and timing. The interest rate compensates the non-owner spouse for waiting to receive their full share and ensures the value they receive remains relatively consistent with the value determined at the time of divorce.
Buyout structures can be quite flexible. Payments might be monthly, quarterly, or annual. They might be fixed amounts or tied to business performance. They might be secured by business assets or other property to protect the non-owner spouse if payments stop. The right structure depends on business cash flow, tax implications, other settlement terms, and what both parties are comfortable with.
Protecting Your Business Through Divorce
Divorce doesn’t have to destroy the business you’ve built. With strategic planning, accurate valuation, clear separation of personal and business finances, and creative settlement structures, business owners can navigate divorce while maintaining business operations and positioning themselves for future success.
The key is working with legal counsel who understands both business finances and divorce law, who can help you think through the implications of different approaches, and who can facilitate productive discussions with your spouse about how to handle the business fairly without harming its value or viability.
At Miller Law Group, we’ve worked with countless business owners through divorce, from sole proprietors to partners in larger companies, across industries from professional services to retail to manufacturing. Our focus on mediation and collaborative divorce means we help business owners and their spouses find solutions that work for everyone, protecting business value while ensuring fair distribution of marital assets.
