Does your company need a 409A valuation?  

Written By:
Akhil Nallapati
January 30, 2023

Does your company need a 409A valuation?

Any private company that is planning to grant stock options to their employees or other service providers who are US taxpayers will need a 409A valuation. The valuation is used to set the exercise price of the stock options, which must be at or above the fair market value of the stock in order to comply with the rules of Section 409A of the Internal Revenue Code.

If you have employees in the US that you want to grant equity to, you will need 409A, even if you are a foreign company.

How often do you need a 409A valuation?

Companies are required to perform a 409A valuation at least annually, or in the event of a significant occurrence that could impact the company's value. Such occurrences, known as "material events", may include new equity funding rounds, takeover offers, secondary sales of common stock, and significant changes in the company's financial prospects. Additionally, companies nearing an initial public offering may conduct 409A valuations more frequently, such as on a quarterly or even monthly basis.

If you don’t fully grasp the requirements, and want to have a clear understanding of inputs, process and next steps when it comes to 409A valuation, speak with our experts and receive the final report within two weeks.

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