409a/ASC 718 Valuation
In the world of early-stage and startup companies, equity compensation is a valuable incentive for hiring and retaining top talent. To offer equity, a company must first determine the Fair Market Value (FMV) of its common stock with a 409A valuation by a qualified independent appraiser. A 409A valuation report will support that the strike price for options to be granted are not below FMV and will provide “safe harbor” eligibility. These valuations are an IRS necessity before the issuance of any type of equity compensation, as the company’s FMV establishes the value of stock options that are issued to employees.
Corporate Value Consulting (CVC) Services
Our Corporate Value Consulting (CVC) team has the coverage, knowledge, and trusted name you can rely on to help you through your 409A valuation needs. At Withum, we possess the accounting, consulting, and valuation expertise needed to accurately value private companies, evidenced by the hundreds of engagements completed on behalf of our clients, inclusive of early-stage startups.
We apply forward-thinking insight and a deep understanding of valuation theories to your company’s 409A valuation to ensure “safe harbor” eligibility. We recognize that a 409A valuation is not a simple numbers exercise and are here to help you make sense of it all. We work to understand your business dynamics, as well as sector and value drivers to provide service that goes beyond the limitation of impersonal automated software providers.
Our process is simple and streamlined which allows you to focus on what matters most, building your company.
What our Clients are Saying
It has been an absolute pleasure working with Withum’s knowledgeable and professional valuation team. After spending years working with a software generated valuation, it was a breath of fresh air to have a conversation and work with a team that understood our nuances and needs. We look forward to working with Withum on future valuation requirements.
Financial Technology Firm - $200MM+ Post Money Valuation
409A FAQS
- Do I Need a 409A Valuation? If you offer equity, or plan to, a 409A valuation is required for tax and financial reporting compliance.
- When Should I Get a 409A Valuation? Before issuing stock options, after raising a round of financing, once every 12 months or after a material event, such as approaching an IPO, merger or acquisition.
- What is 409A “Safe Harbor”? A “safe harbor” valuation is one the IRS presumes to be valid for up to 12 months unless they can prove it to be “grossly unreasonable”.
- What are 409A Penalties? If your company falls out of safe harbor, penalties can become substantial for employees and shareholders. Penalties include: all deferred compensation from current and preceding years becoming immediately taxable, accrued interest on this revised tax amount and additional tax of 20% on all deferred compensation.
Contact Us
For more information or to discuss your business needs, please connect with a member of our team.
