Posted on: 15th Aug, 2010 09:07 am
Non-Arms Length Transaction. What does this mean?
Hi tommyp,
Arm's length transaction is a transaction where the parties are dealing from equal bargaining positions. None of the parties are subject to the other's control or influence. The transaction is treated with fairness and integrity. A non arm's length transaction is just the opposite of it i.e. someone with control or being influenced. However such transactions are not illegal. For example, there are business owners who hold two different entities for their business - one for the real estate and the other for business operations. Transactions between the real estate and business operations are not at arms length.
Thanks,
Jerry
Arm's length transaction is a transaction where the parties are dealing from equal bargaining positions. None of the parties are subject to the other's control or influence. The transaction is treated with fairness and integrity. A non arm's length transaction is just the opposite of it i.e. someone with control or being influenced. However such transactions are not illegal. For example, there are business owners who hold two different entities for their business - one for the real estate and the other for business operations. Transactions between the real estate and business operations are not at arms length.
Thanks,
Jerry