How is an LLC treated in a NY divorce

Written by Yonatan Levoritz on May 6, 2025

When dividing property during a divorce in New York, things can get complicated fast—especially when one or both spouses own a business. One of the most common questions we hear is, How is an LLC treated in a divorce? The answer isn’t always simple, but understanding how the courts view business ownership helps both parties protect what matters most. At Levoritz Law, we’ve helped clients navigate tough divorce-related business matters with precision and care. In New York, courts may classify an LLC as either marital or separate property, depending on whether it was formed before or during the marriage and how financial contributions were handled throughout.

What is considered an LLC?

A Limited Liability Company (LLC) is a popular business structure that offers the liability protection of a corporation while maintaining the operational flexibility of a partnership. In an LLC, the owners—called members—are generally not personally liable for the company’s debts or legal issues. This means their personal assets, like homes or savings, are typically protected if the business incurs losses or faces a lawsuit.

When assessing whether an LLC falls under marital property in a New York divorce, the court considers its formation date, financial involvement during the marriage, and its role in supporting the household. Just because one spouse holds the membership interest doesn’t automatically place the business outside the marital estate.

Some LLCs involve multiple partners or investors, which can complicate valuation and division. For instance, buy-sell agreements or operating agreements may limit how ownership interests are transferred or valued in the event of divorce. In such cases, courts may have to weigh these contracts alongside the equitable distribution rules.

The impact of divorce on Shared Assets

Under New York’s Equitable Distribution Law, marriage is recognized not only as a social union but also as an economic partnership. When a couple divorces, the court divides property in a way that is fair—not necessarily equal—based on a variety of factors outlined in the law.

Property Types in Divorce

• Marital Property: Includes all property acquired by either spouse during the marriage, regardless of whose name is on the title. This includes pensions, retirement accounts, and real estate. Only the portion acquired during the marriage is subject to division.
• Separate Property: Includes property owned before the marriage and gifts, inheritances, or personal injury awards received individually during the marriage.

An LLC formed or expanded during the marriage may fall into the marital category. That means its value—whether from active growth or passive appreciation—can be subject to division, even if held in just one spouse’s name.

How does that division happen? The court may assign a value, order a buyout, or use income projections as part of a broader financial arrangement. These decisions are tailored to each case and hinge on full financial transparency.

This foundation helps frame how LLCs are handled specifically—something we explore in the next section.

How an LLC is treated in a NY Divorce

An LLC is treated as marital or separate property depending on when it was established and how it was maintained. If the company predates the marriage and keeps it entirely separate—meaning no joint funds were invested and no spousal effort contributed—it might be considered separate property.

However, things shift quickly if:

• The LLC increased in value during the marriage
• Both spouses contributed time, labor, or funds
• Income from the LLC was used for household expenses

The court may consider all or part of the LLC’s value as marital in these cases. That means it gets added to the list of divisible assets, even if only one spouse’s name is on the paperwork.

What if only one spouse was involved? Fairness still applies. The other spouse could receive compensation through a distributive award instead of direct business ownership.

How to protect your assets during a divorce

No one starts a business thinking it’ll end up in divorce court—but it happens. So, how do you safeguard what you’ve built?

One smart move is to have a prenuptial or postnuptial agreement that outlines how business assets will be handled. These documents can designate the LLC as separate property and explain how future appreciation should be treated.

Next, keep your business finances clean and separate. Avoid using marital accounts to fund operations or pay yourself a salary that isn’t clearly documented. When business and personal finances mix, arguing that the LLC is separate becomes harder.

Valuation also plays a big role. Hire a neutral appraiser who understands business structures. That way, if your LLC’s value is scrutinized, you have reliable data to support your position.

The role of an attorney in divorce cases involving LLCs

Handling property division with an LLC in the mix isn’t just a matter of paperwork—it’s strategy. A lawyer helps you understand your finances, spot red flags, and negotiate solutions that protect your long-term interests.

We guide clients through tough decisions—keeping the business, buying out their spouse, or selling and dividing the proceeds. Our approach isn’t one-size-fits-all. We look at your goals, the business’s structure, and what’s legally fair.

We’ve also intervened in cases where one spouse tried to undervalue or hide business income. With the right legal approach, maneuvering can be addressed quickly and decisively.

And for those asking how an LLC is treated in a divorce when there’s out-of-state business activity or joint ownership, we break down jurisdictional complexities to ensure the NY court has a full picture of your assets.

Contact today a NYC divorce attorney from Levoritz Law

Dealing with a divorce that involves a business interest like an LLC? Don’t leave your financial future to chance. Our firm understands the high stakes and knows how to navigate complex property division cases. Contact us today at (718) 942-4004 to speak with a NYC divorce attorney from The Levoritz Law Firm —we’re here to help you make confident, informed decisions.

Let’s talk about how an LLC is treated in a divorce applies to your case and how you can secure what matters most.