What is "substance over form" in business law?

Posted on Monday, December 7th, 2009 at 4:41 am    

Many legal rulings concerning business transactions cite the substance over form doctrine. This legal doctrine is usually employed when a business transaction may appear to be legal but actually contains illegal elements.

For instance, if a corporation owned primarily by one shareholder pays the shareholder's child a substantial salary for little or no work, then the court will likely not regard this compensation as salary. Instead, the court will determine that the compensation is a constructive dividend by virtue of the substance over form doctrine. 

If you or anyone you know has questions about your business transactions, contact the Iowa business transactions lawyers of LaMarca Law Group, P.C., at (877) 327-2600. 

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