What is a 409A valuation, and why do I need one for my startup?
A 409A valuation is an appraisal of the fair market value of a private company's common stock. As a founder, you need this valuation to ensure that your stock options are issued with an exercise price at or above FMV, which is a requirement under Internal Revenue Code Section 409A to avoid adverse tax consequences for option holders. Issuing stock options with an exercise price below FMV can result in significant penalties and taxes for the employees receiving them.