Glossary

In business, an arm's length transaction is a deal in which the buyers and sellers act independently and do not have any relationship to each other. The concept of an arm's length transaction assures that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party. Both parties usually have equal access to information related to the deal. It also assures third parties that there is no collusion between the buyer and seller.

word use: Having a independent director adds a arm's length distance of decision making, especially in tax structures for a company.

Arm's Length vs. Arm-in-Arm Transactions.

In general, family members and companies with related shareholders are not considered to be transacting at arm's length. These types of  deals are also known as arm-in-arm transactions.

**Special Considerations

Important: Tax laws throughout the world are designed to treat the results of a transaction differently when parties are dealing at arm's length and when they are not.

Elected by the shareholders, the board of directors is made up of two types of representatives. The first type involves inside directors chosen from within the company. The role of the board is to monitor a corporation's management team, acting as an advocate for stockholders. In essence, the board of directors tries to make sure that shareholders' interests are well served.

word use: Sometimes members or the Board of Directors are designated as a committee chairman to explore business ideas.

A chief financial officer (CFO) is the senior executive responsible for managing the financial actions of a company. The CFO's duties include tracking cash flow and financial planning as well as analyzing the company's financial strengths and weaknesses and proposing corrective actions.

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word use: The Chief Financial Officer arranged to receive the customer payment via wire transaction.

Pertaining to compliance in governance, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that organizations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws, policies, and regulations.

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word use: In order to take advantage of favorable tax statutes, a company must be in complete governing and accounting compliance.

A conglomerate is a corporation made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies which conduct business separately.

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word use: Apple inc. and Amazon are examples of conglomerates because the own several subsidiary companies that you rarely ever hear about or dont even realize that a company is owned or controlled by them.

A resolution is a formal expression of opinion or intention agreed on by a legislative body or other formal meeting, typically after taking a vote.

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word use: A board of directors must vote to approve a Corporate Resolution allowing the company to restructure it's new tax structure, and it's implementation.

An appointed or elected member of the board of directors of a company who, with other directors, has the responsibility for determining and implementing the company's policy.

A company director does not have to be a stockholder (shareholder) or an employee of the firm, and may only hold the office of director. Directors act on the basis of resolutions made at directors' meetings, and derive their powers from the corporate legislation and from the company's articles of association.

As the company's agents, they can bind the company with valid contracts entered into with third-parties such as buyers, lenders, and suppliers (see powers of directors).

Spread (something, especially information) widely.

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word use: People often wonder how conglomerates pay no federal income tax, the simple answer is they don't disseminate their techniques and methodologies.

Power of free decision or latitude of choice within certain legal bounds

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word use: It is at the stockholders discretion to nominate an independent director to oversee the revamping of a strategic tax structure.

Material that provides official information or evidence or that serves as a record.

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word use: Companies make decisions such as granting and approving share holder loans which are tax free to the recipient when compliant with documentation via corporate resolutions.

An organization (such as a business or governmental unit) that has an identity separate from those of its members

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word use: Cities, corporations, sole proprietors, and corporate committees are each an entity unto their own.

and others

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word use: A contract might rear "This offer to buy the listed equipment is between XYZ Inc. Et al."

Corporate governance is the system of rules, practices and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.

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word use: A companies pcompliant governance and management is vital to it's financial viability.

An independent director AKA an outside director is a member of a company's board of directors that the company brought in from outside (as opposed to an inside director chosen from within the organization). Because independent directors haven't worked with the company for a period of time (typically for at least the previous year), they aren't existing managers and do not have ties to the company's current way of doing business. Independent outside directors can bring new insights and balance to a team.

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word use: XYZ Co. brought in an independent director to oversee the newly formed TAX STRUCTURING COMMITTEE because  is an outsider and expert.

An ambiguity or inadequacy in the law or a set of rules.

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word use: Tax laws favoring specifically structured entities are referred to as loopholes.

laws

word use: Failure to conduct compliant governance can be a violation of state and federal statutes.

A singular director of a company thus constituting the Board of Directors.    "The Director"

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word use: John Doe of John Doe Enterprises Inc. is the sole director of his manufacturing company.

Plans of action or policy designed to achieve a major or overall aim.

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word use: Many companies pay their taxes without considering the savings a

An action or strategy carefully planned to achieve a specific end.

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word use: Using subsidiary companies are a excellent idea in reducing business taxes because the true purpose of their use are not widely disseminated and even less understood.