Arm's Length Market

A distance that is not large enough when the annoying store clerk has rancid breath. In truth, arm’s length market means you don’t know the person you’re doing business with (on a personal level).

This term can apply to many areas of business. For example, if you’re purchasing stock in McDonald’s, you probably don’t know any of the executives of the company who would likely have inside information regarding how well or poorly this quarter was going. You don’t have insider info, and you’re not involved in a relationship with anyone who is involved in McDonald’s.

This can also apply to real estate (like when you buy a home). If you don’t know the person you’re buying from or selling to, this is considered an arm’s length transaction in which you’ll pay (or receive) a fair price. If you’re not operating within arm’s length, and you’re not paying fair market value, you might have to pay some fancy taxes.