How a Business Is Valued and Divided in a New York Divorce

If you or your spouse owns a business, a medical or dental practice, a law practice, a contracting company, a restaurant, a farm, or a share of a family company, that interest is going to be valued in your divorce. This page explains who does the valuation, what they look at, what the other spouse actually receives, and where the fights happen.

Is the business marital property?

A business started during the marriage is marital property regardless of whose name is on it. A business started before the marriage is separate property, but the increase in its value during the marriage is marital to the extent the increase came from the efforts of either spouse rather than from market forces. The Court of Appeals set that rule in Price v. Price in 1986 and refined it in Hartog v. Hartog in 1995. The practical result is that even a business that predates the marriage usually produces a marital component, and the fight is over how much of the appreciation is active and how much is passive.

Who values it and as of what date?

In a contested case, the court usually appoints a neutral valuation expert, often at the request of both sides, and allocates the cost between the parties. Either side can retain its own expert as well. Under the court rules, expert reports are exchanged at least sixty days before trial and rebuttal reports thirty days before.

The valuation date matters. Actively managed businesses are typically valued as of the date the divorce action was commenced, so that the owner's post-commencement efforts do not benefit the other spouse and the owner's post-commencement neglect does not hurt them. Passive assets are often valued closer to trial. In the Wen Wen Sun case decided by the Second Department in November 2025, a hedge fund interest was valued at commencement at 607,000 dollars and the wife received 35 percent of that figure.

What does the expert look at?

The expert will ask for five years of business tax returns, financial statements, general ledgers, bank statements, payroll records, owner compensation and perquisites, buy-sell agreements, leases, and any prior valuations prepared for a bank, a buy-in, or a partner. From those records, the expert does three things.

First, normalizes the earnings. Owner salary is adjusted to a market rate. Personal expenses run through the business, such as vehicles, travel, family members on payroll, and phone plans, are added back. One-time events are removed.

Second, applies a method. The income approach capitalizes normalized earnings or discounts projected cash flow. The market approach compares the business to sales of similar businesses. The asset approach values the underlying assets, which is common for holding companies and for businesses that are not profitable.

Third, applies discounts. A discount for lack of marketability reflects the fact that a private business cannot be sold as quickly as a stock. A discount for lack of control may apply to a minority interest. These discounts are argued over constantly because a ten-point change in the marketability discount moves the number by ten percent.

For a professional practice, the expert will separate the value of the practice's tangible assets, receivables, and enterprise goodwill from the personal goodwill of the professional. Personal goodwill is inseparable from the individual, and since 2016 New York does not treat a spouse's enhanced earning capacity as marital property, so this distinction has real dollars attached to it.

What does the other spouse actually receive?

Almost never an ownership interest. Courts do not make former spouses business partners. The non-titled spouse receives a percentage of the value as a distributive award, usually paid over a period of years, sometimes secured by a lien or life insurance. The percentage is not fixed by statute. Awards in the range of 20 to 35 percent are common where the titled spouse built and runs the business and the other spouse's contributions were indirect, and higher where the non-titled spouse worked in the business or where the marriage was long. The Second Department in December 2025 affirmed a Westchester judgment giving the wife a share of income-producing business interests together with maintenance of roughly 2,440 dollars per month for 55 months, and rejected the husband's argument that this was double counting.

What is double counting and why does it matter?

If a business is valued by capitalizing its income, and the owner is then ordered to pay maintenance out of that same income, the other spouse has been paid twice from the same dollars. The Court of Appeals prohibited this in 2006 in Keane v. Keane for intangible assets valued by capitalizing income, such as licenses and professional practices, while allowing it for tangible income-producing property such as rental real estate. In practice, this means the maintenance analysis and the valuation analysis have to be done together, and a settlement that ignores the interaction leaves money on the table for one side or the other.

What do I do now?

If you are the owner, do not change the way the business operates, do not change your compensation, and do not move money. The automatic orders that take effect when the divorce is filed prohibit transfers outside the ordinary course of business, and a judge who sees a pattern of pre-divorce changes will draw the obvious conclusion. Gather the records listed above so that your own expert has a clean set.

If you are the non-owner, the most important thing you can do is assemble what you know about the business before the case starts: what it earns, what it pays for, who works there, and what it has been worth to a bank or a buyer. A spouse who has been kept away from the finances has discovery tools to get the records, but a head start is worth months.

Call 516-928-5838 or use the contact form to schedule a free thirty-minute consultation.