What if my company cannot afford a 409A valuation, can I still grant equity to employees?
An alternative to granting stock options (which should not be done in the absence of a current 409A report) is the issuance of restricted stock, which does not fall under the stringent IRS regulations applicable to options. This provides a certain degree of flexibility in determining fair market value (FMV) through the company's Board. However, it is still advisable to exercise caution and consider various company-specific factors when setting the FMV for restricted stock. After obtaining a 409A valuation, it is recommended to use the established FMV for both options and restricted stock grants.