Arm’s Length Definition
An arm’s length transaction is one in which the parties are independent and there is no relationship between them. The term is most commonly used in reference to transactions between family members or other related parties, but can also refer to transactions between unrelated parties.
The main purpose of an arm’s length transaction is to ensure that the parties are acting in their own best interests, rather than being influenced by their relationship with each other. This type of transaction can help to avoid potential conflicts of interest and ensures that both parties are getting a fair deal.
There are several factors that must be considered in order to determine whether a transaction is at arm’s length. These include the nature of the relationship between the parties, the degree of control each party has over the other, and whether there is any history of preferential treatment or dealings between them.
In general, an arm’s length transaction is one that is free from any influence or pressure from either party. It is a fair and equal transaction that benefits both parties involved.
