The Madison Square Garden arena is shown in New York.
Andrew Harrer | Bloomberg | Getty Images
Madison Square Garden filed paperwork on Friday with the SEC to separate its live sports and entertainment businesses from its media businesses. The businesses will split into two publicly traded companies.
The company's board of directors hopes that the tax-free spinoff will enhance the long-term value potential of both businesses and allow for more individual and flexible business plans.
Read MoreKetchup and cheese, together at last?
MSG shareholders will own equity in both companies after the spin off and will be able to evaluate investment decisions.
The company plans the separation for before the end of 2015. MSG stocks rose 5 percent in after-hours trading.