The posts should be objectively good, and have a decent amount of effort put into them.
If you know someone from another place, don’t have any relationship that might be perceived as a conflict of interest, such as a family, romantic, close personal, business or financial relationship, I don’t see any issues with giving merit.
If you have any of the above types of relationships, I would generally avoid giving merit yourself, especially to family members, romantic partners and those you have a close personal relationship with (such as a roommate). For other relationships described above I would generally shy away from giving merit to these people, but if you do, I would hold these people to a higher standard.
I don’t see an issue with reporting any of the above posts to others and others can make their own judgment on if a post deserves merit.
Well, when you talk about business relationships it gets kinda murky.
We do upvote each other posts on Steemit, so that could possibly be construed as a business relationship.
I would consider a business relationship someone you either trade with on a regular basis, have an employee/employer relationship, or run a business with. A business relationship is one that either generates income for you, or provides you access to liquidity and/or capital. The extent of how much of your income you rely on this person for also matters, for example if you make $200 a month from your relationship with the person when you make several thousand dollars per month, your relationship might not be a huge conflict of interest, while a relationship that generates substantially all of your income would be a more clear conflict of interest.
If you give a couple of merit her and there to someone you are in business with, while giving 95%+ of the merit you send every month to others, it would probably not be a big deal, while giving a larger percentage, or a majority of the merit you send every month to someone you are in a business relationship with is probably not making a good use of the merit system, in my view.
If the extent of your relationship with the person is you follow eachothers blog, and you chat for a few hours a week, (and you upvote eachothers blogs, which would result in very little money for each of you), I don't have any concerns about you sending merit to the person, myself.