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Also known as: 409A, fair market value assessment

409A Valuation

ConceptualLegalFinance

Definition

409A Valuation: A 409A valuation is an independent appraisal of a private company's common stock fair market value, required by IRS Section 409A. It determines the minimum strike price for employee stock options. Companies typically get new 409As annually or after significant events.

Example Usage

“After our Series A, we got a new 409A that increased our strike price from $0.50 to $2.00.”

Common Misconceptions

409A equals company valuation. 409A values common stock, which is less than preferred due to lack of preferences.
You can skip 409As. Failure to have a valid 409A can result in significant tax penalties for employees.
409A is just paperwork. It's a legal requirement that protects both the company and employees.

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