How to Protect Your Business from Divorce in New York

Written by Yonatan Levoritz on August 19, 2025

In New York, business owners often find that divorce introduces more than just emotional complications. When a closely held company becomes part of marital discussions, the financial implications can be significant. Understanding how to protect your business from divorce is crucial if you want to avoid entangling your company in litigation or asset division. At The Levoritz Law Firm, we help Manhattan clients with substantial business interests put proactive legal measures in place to protect their operations.

Taking steps early can make a meaningful difference in safeguarding your business. A well-prepared prenuptial or postnuptial agreement is a practical first move, especially one that outlines how your business will be handled if a divorce occurs. It is also equally important to keep your personal and business finances separate, maintain thorough and organized records, and work with professionals who understand both family law and business operations.

Why Divorce Can Put Your Business at Risk

New York applies equitable distribution in divorce, aiming for fairness rather than a 50/50 split. If your business was started or grew during the marriage, the court might see it as marital property. This classification could lead to your business being valued and partially awarded to your spouse, especially if they supported it or shared in its financial benefits.

Potential risks may include:

• Selling or dividing key business assets
• Operational disruptions while legal issues are resolved
• Valuation disputes that reduce your company’s worth
• Revealing private business information in court

Proactive Legal Tools to Shield Your Business

There are several legal strategies available to help protect your business from divorce, well before any marital issues arise. These include written agreements that define ownership and asset division terms.

Pre-nuptial or Post-nuptial Agreement

One of the most effective ways to protect your business assets is through a prenuptial or postnuptial agreement. These agreements explicitly outline how your business holdings will be treated in the event of a divorce, ensuring it remains separate property. By addressing this matter proactively, you can mitigate potential disputes and safeguard your business interests.

According to the New York City Bar, a valid postnuptial agreement can override standard property division laws, putting you and your spouse in control of how your property is divided.

Buy-Sell Agreement

A buy-sell agreement can provide an added layer of protection for your business during divorce proceedings. By creating a legally binding agreement with other business partners or co-owners, you can establish predetermined protocols for handling a partner’s divorce. This agreement typically includes provisions preventing a divorcing spouse from interfering in the business and defining methods for distributing their shares.

Keep Business and Personal Finances Separate

Commingling finances is one of the fastest ways to unintentionally convert separate business assets into marital property. Courts in New York may consider a business a joint asset if both spouses benefit financially from it or participate in managing it.

Maintaining a clear separation between personal and business finances from the outset is essential. By avoiding mingling personal funds with business accounts and maintaining proper bookkeeping practices, you can strengthen your argument that the business is separate property during divorce proceedings.

Best practices include:

• Use separate accounts for business and personal transactions
• Keep payroll, benefits, and dividends clearly documented
• Avoid using marital funds to invest in or support the business

Maintain Strong Documentation and Valuation

According to Section 202.16 of New York’s Uniform Rules for Matrimonial Actions, financial disclosure and valuation are critical components in divorce cases involving equitable distribution.

Maintain Accurate Financial Records

During divorce proceedings, having meticulously organized and accurate financial records can be instrumental in protecting your business assets. Ensure you keep adequate documentation that clearly distinguishes personal and business assets, including tax returns, financial statements, and business valuations. When your financial records are transparent and well-documented, it becomes easier to demonstrate the distinction between marital and non-marital assets.

Business Valuation

Determining the precise value of your business is essential for equitable asset division. Engage a qualified business appraiser who can assess the worth of your business objectively. A thorough business valuation not only establishes an accurate monetary value, but it can also influence the final settlement, helping ensure a fair distribution of assets.

Smart Compensation and Ownership Strategies

Your compensation structure and business ownership arrangement can affect how a court values and divides the business.
Consider structuring your compensation to minimize your spouse’s claim on your business. If possible, rather than relying on a traditional salary, explore alternative methods such as dividends, profit-sharing, or reinvesting profits into the business. Approach this aspect diligently and consult with a financial advisor and attorney to ensure compliance with tax laws and regulations.

Strategies may include:

• Issuing non-voting shares to limit influence
• Using tiered ownership structures
• Retaining earnings within the company rather than taking large distributions

What Happens to Your Business in a New York Divorce?

If the court finds your business to be marital property, it could fall under New York’s equitable distribution rules. In that case, your spouse might be awarded a share, even without playing a role in running the business.

Several factors influence that determination:

• When the business was started in relation to the marriage
• Whether your spouse helped grow the business, either directly or indirectly
• Whether business income contributed to household expenses

Depending on these details, outcomes vary. The court might order a sale with divided proceeds, give one spouse the business with a payout to the other, or leave both parties as temporary co-owners.

In Manhattan’s high-asset divorce cases, judges usually aim to preserve the business’s stability while finding an equitable solution.

Protect Your Business and Your Future With The Levoritz Law Firm

Owning a business takes constant attention. When divorce enters the picture, the stakes get higher. To protect your business during divorce, having an experienced legal team that understands how family law intersects with running a business is essential.

The Levoritz Law Firm supports New York City entrepreneurs who need to protect what they’ve built. Call us at (718) 942-4004 to schedule a private consultation. Let’s talk about a plan that keeps your business stable and your future on track.