FAQs

A 409A valuation determines the fair market value (FMV) of a private company’s common stock when issuing stock options or equity compensation. Any private company granting options to employees, advisors, contractors, or board members needs a 409A valuation.

Penalties include:

• Immediate taxation of all deferred compensation from the current and preceding years
• Accrued interest on the revised taxable amount
• An additional 20% tax penalty on all deferred compensation

A 409A valuation typically remains valid for 12 months, or until a material event occurs (such as a funding round, major revenue change, or acquisition offer).

A valuation prepared by an independent third-party automatically receives Safe Harbor
protection, meaning:

• The IRS presumes the valuation is correct
• The burden of proof shifts from the company to the IRS
• The valuation is considered valid unless “grossly unreasonable”

Safe Harbor is one of the biggest advantages of using a qualified independent valuation provider. Non-compliance is expensive and creates long-term financial risk.

Typical documents include:

• Historical financial statements
• Financial projections
• Cap table and option ledger
• Articles of Incorporation
• Recent Term Sheet / Stock Purchase Agreement
• Pitch deck or business plan
• Prior Valuation Report (if any)
• Next major milestone (e.g., fundraising or product development stage)

No. A 409A valuation cannot be used to set or justify a fundraising valuation. Fundraising valuations reflect investor pricing of preferred shares, which have superior rights.

Because preferred stock carries liquidation preferences and other rights, fundraising valuations are typically higher than 409A valuations.

No. The IRS imposes stricter compliance requirements and documentation standards for Gift & Estate valuations under Sections 2031 and 2512. DLOC/DLOM and ownership rights must be analyzed separately.

Yes. We provide two hours of complimentary audit or IRS review support with each valuation engagement. Additional support is billed at $250/hour. In most cases, the included support is sufficient.

Our standard timeline is 3 business days to one week, depending on complexity.

Absolutely. If you’ve had a prior 409A valuation, simply upload it during onboarding and we’ll take it from there. If this is your first valuation, just skip that step—we will guide you through the process from start to finish.