409A Valuation, plain English.

A 409A valuation is an independent appraisal of a private company's common stock, used to set the fair market value that stock options are priced at, so option grants comply with IRS Section 409A and avoid tax penalties. Startups that grant options generally need one. We keep your cap table organized so valuations and grants line up.

Because pricing stock options below fair market value can trigger significant tax penalties under Section 409A for your employees, a defensible independent valuation sets the strike price and provides safe-harbor protection. We flag when you need one so your option grants are priced correctly and protected.

Typically before granting your first stock options and then periodically, commonly annually or after a material event like a financing, since the valuation must be reasonably current to provide protection. We flag the timing so your grants always rest on a current valuation rather than a stale one that loses its safe harbor.

A 409A valuation performed by a qualified independent party is presumed reasonable, shifting the burden to the IRS to prove otherwise, which is why startups use independent valuations rather than guessing. We flag how the safe harbor works so your option pricing is defensible if ever questioned.

Generally at least annually, and sooner after a material event such as a new financing round that changes the company's value, since options priced off a stale valuation can lose safe-harbor protection. We flag when a refresh is due so your grants stay compliant as your company's value changes.

The valuation prices the options that sit on your cap table, so accurate ownership and option records support a clean valuation and correctly priced grants. We keep your cap table organized so the valuation and your equity grants are consistent and investor-ready.

A qualified independent valuation provider performs it, since independence is what provides the safe harbor, so it is not something you set yourself. We flag how the valuation fits your equity process and keep your cap table organized so the provider has clean data to work from.

Pricing options without a defensible valuation risks the IRS deeming them underpriced, triggering income tax, penalties, and interest for your employees, a serious problem, so startups treat the valuation as essential. We flag the risk so your option program does not create tax exposure for your team.

We form the corporation, set up and organize the cap table, and flag how 409A valuations, option pricing, and vesting fit together, coordinating with your valuation provider and counsel, so your equity program is set up correctly and your grants are compliant.