Valuation
What is 409A Valuation?
An independent fair-market valuation of a private company's common stock, required by IRS Section 409A before issuing options.
A 409A valuation is an independent appraisal that establishes the fair market value (FMV) of a private company's common stock. This FMV becomes the strike price for new stock options. 409As are required by IRS Section 409A to avoid punitive tax treatment on option grants. Standard validity is 12 months OR until a 'material event' (new priced round, major commercial milestone, prep for acquisition). Most companies refresh 409As after every priced round. AI-powered 409A estimates are now common at early stages; formal third-party 409As remain standard before significant grants or audits.