Owning a business and going through a divorce can feel like trying to steer a boat in choppy Great South Bay waters. The good news is that New York courts deal with this situation every day, and there are predictable steps we can take to protect the company you built and reach a fair outcome.
In New York, assets are divided under equitable distribution, which focuses on fairness, not a strict 50–50 split. Whether a business is part of the marital estate depends on how and when it was created, funded, and grown.
You cannot divide a business fairly until you know what it is worth. In most cases we retain a credentialed business valuation expert. That expert chooses recognized methods based on the company’s nature, size, and records.
Goodwill is a common flashpoint. Enterprise goodwill is tied to the business itself, like brand reputation or location, and is generally included in value. Personal goodwill belongs to the individual owner’s skills and relationships. Courts are careful not to overvalue personal goodwill because you cannot transfer a person’s reputation like you transfer a truck or a lease.
If a pre-marital business grew during the marriage, the court looks at why. Growth caused by the owner’s active work or by marital contributions tends to be marital. Growth from market forces, like a pandemic boom in a specific industry, can be considered passive and may remain separate. This distinction matters for service firms and small local shops where an owner’s day-to-day effort drives results.
A Babylon divorce should not sink your operations. Early in the case, we typically seek temporary orders that keep the business running and prevent either spouse from moving money in unusual ways. Day-to-day decisions stay with the operating spouse, while major changes, like selling assets or taking on new debt, usually require consent or a court order. We also use nondisclosure agreements and protective orders so that sensitive records, customer lists, and pricing stay confidential during discovery.
Expect to gather tax returns, profit and loss statements, balance sheets, general ledgers, bank and credit card statements, payroll reports, lease agreements, loan documents, customer contracts, and any ownership or governance paperwork. Clean, complete books reduce the cost of valuation and strengthen your negotiating position. If records are messy, we can work with your accountant to rebuild what is needed.
Most business-owner divorces settle. Here are common structures that work well on Long Island:
When the business is valued using income, there is a risk of double counting if that same income is used again to set high support numbers without adjustment. New York courts are mindful of this, and careful lawyering can prevent a result that forces the owner to pay an amount the company’s cash flow cannot sustain. The goal is a total package that fits together: equitable distribution, maintenance, and child support that match the real capacity of the business.
Structure matters. An S-Corp, LLC, or sole proprietorship can have very different tax treatments. A buyout paid as a distributive award is usually not taxable to the recipient nor deductible by the payor, but maintenance has its own rules. We coordinate with your CPA so that buyouts, refinancing, or asset transfers do not create surprise tax bills. We also map payments to seasonal cash flow, which is critical for retailers, restaurants, contractors, and other Babylon businesses with busy and slow periods.
If you or your spouse owns a professional practice, like a medical, dental, legal, or design practice, the license itself is not divided as property in New York. The practice value can be divided, but personal goodwill is scrutinized closely. Non-owner spouses who contributed at home or worked in the office may receive credit for those efforts as part of equitable distribution.
Courts recognize non-owner contributions. If your spouse managed the books, took calls, covered childcare to free you to work, or helped launch the company, those efforts can support a larger share of the marital portion. On the flip side, if the owner took a below-market salary to reinvest in growth, we show that sacrifice to explain where the value came from.
Every plan starts with your priorities. Some owners want to keep the company at all costs. Others prefer a clean exit with predictable payments. At Chris Palermo Law, we focus on early valuation strategy, confidentiality, and cash-flow-aware settlement terms. We know the Suffolk County courts, local experts, and the practical expectations that move cases to resolution without putting your livelihood at risk.
Your small business does not have to become a casualty of divorce. With a careful valuation, the right protective orders, and a settlement that respects cash flow and taxes, you can preserve what you built and move forward with clarity.
If you own a business in Babylon and want a plan tailored to your situation, contact Chris Palermo for a confidential consultation. Let’s protect your company while securing a fair resolution for your family.