West Lafayette Startup Attorneys & Lawyers

What Is an Arm's Length Transaction?

"Arm's length" refers to a legal transaction in which buyers and sellers of products or services have no relationship to one another either by blood, marriage, or business dealings. Without a relationship, buyers and sellers can act independently. Without previous ties, an arm's length transaction makes sure neither person feels pressured by the other or acts in connection with one another.

The idea of an arm's length transaction, also known as an arm-in-arm transaction, came about in the real estate market as a way of handling tax authorities. Generally, family members and businesses with related shareholders are not acting at arm's length, which can cause ethical problems. Such ethical issues include a company's supervisor who forces an employee, under the threat of termination, to buy real estate using the boss's name.

In the 1997 case McNichol et al v. The Queen, the tax judge

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Updated October 29, 2020:

What is Your Principal Place of Business?

This question is not as simple as it sounds. For a sole proprietor or a one-location company, the answer is straightforward – your principal place of business is your home, shop, office, or wherever you primarily do business. But large companies and corporations often have several locations spread out across the country, or even around the world. In these situations, the company headquarters is usually the principal place of business. This is not necessarily the same state as the state of incorporation.

The supreme court finally ruled that the “nerve center” of the company is the principal place of business. The nerve center test refers to the s

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Updated October 15, 2020:

Reverse Vesting: What Is It?

Reverse vesting occurs when a company's co-founder receives his or her shares and ownership interest upfront. This exchange is subject to vesting similar to employee stock options. If the co-founder leaves, the company may repurchase a set amount of those shares.

The founder already owns all the shares with reverse vesting and may be forced to sell a specific percentage of them for no profit if the complete vesting period hasn't been finished. Reverse vesting is a term used to define a specific situation where an independent contractor or an employee gets stock that's subject for the company to repurchase at-cost. The right to repurchase lapses the vesting period.

This is the opposite of a normal situation, where a provider for a service gets the right to buy stock or an o

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