arm's length means no affiliation.

For example, A owns A co, a non-incorporated business, now A wants to retire and utilized his QSBCS capital exemption, if A incorporates his business A co, and rollover the assets to A co at an elected amount higher than his cost base, hoping to trigger the QSBCS, but in this case, A and A co is dealing at non-arm's length, so the excess would be treated as a deemed dividend, not capital gain. A's escape route would be to sell his assets to B co., a firm that's not related to A nor A co, and since A and B co is dealing at ARM'S LENGTH, the capital gain is triggered.