Home / Valuation Services / 409A Valuation
Compliance & Tax

409A Valuation Services

Protect your employees. Satisfy your auditors. Stay compliant.

1000s 409A Valuations Completed
100% Audit Success Rate
24hr Quote Turnaround

What is a 409A Valuation?

A 409A valuation is an independent appraisal of the fair market value (FMV) of a private company's common stock, required by Section 409A of the Internal Revenue Code. This valuation establishes the minimum exercise price for stock options granted to employees.

Without a proper 409A valuation, your company and its employees face significant tax penalties—including a 20% federal tax penalty plus state penalties and interest on any options deemed to be "discounted."

The IRS doesn't accept internal valuations. You need an independent, qualified appraisal that documents your company's fair market value using accepted methodologies. That's where we come in.

Why It Matters

Options granted below fair market value can result in:

  • 20% federal penalty tax on the spread
  • Additional state penalties (up to 5% in California)
  • Interest charges from grant date
  • Audit exposure for both company and employees

When Do You Need a 409A Valuation?

The IRS requires a new 409A valuation within 12 months, or sooner if a "material event" occurs

Equity Financing Round

Closing a priced round (Series Seed, A, B, etc.) typically increases your company's value and triggers a new 409A requirement.

Annual Expiration

409A valuations are valid for 12 months. Even without material changes, you need a fresh valuation annually to maintain safe harbor.

First Stock Option Grant

Before issuing any equity compensation, you need a 409A to establish the strike price and protect your team.

Material Business Events

Significant changes—major customer wins/losses, key hires/departures, new products, M&A discussions—may require an update.

First Revenue or Profitability

Generating meaningful revenue or turning profitable materially affects valuation and typically requires an updated 409A.

Audit Preparation

Preparing for an audit or IPO? Auditors will scrutinize your 409A history. We ensure your documentation is bulletproof.

Our Approach

Rigorous methodology. Defensible conclusions. Clear communication.

01

Information Gathering

We collect your cap table, financials, projections, and any material information affecting value. Our streamlined process minimizes your time commitment.

02

Enterprise Valuation

We determine total enterprise value using industry-standard approaches: income approach (DCF), market approach (comparable companies and transactions), and asset approach where applicable.

03

Equity Allocation

For companies with complex capital structures, we use appropriate allocation methods—Option Pricing Model (OPM), Probability-Weighted Expected Return Method (PWERM), or Current Value Method—to determine common stock value.

04

Discounts & Adjustments

We apply appropriate discounts for lack of marketability (DLOM) based on empirical studies and your specific circumstances, ensuring defensible conclusions.

05

Report Delivery

You receive a comprehensive, audit-ready report documenting our analysis, methodologies, and conclusions. We walk you through the results and answer any questions.

06

Ongoing Support

Questions from auditors or investors? We're here. Your 409A engagement includes support throughout the valuation period.

Why Choose IQ Valuations for Your 409A?

Built the Industry Standard

Our founder built valuation practices at Carta, Ryan, and Scalar—firms that have collectively completed tens of thousands of 409As. We wrote the playbook.

Senior-Led Engagements

No handoffs to junior analysts. You work directly with partners who have completed thousands of valuations and can answer questions on the spot.

Speed Without Sacrifice

We understand startup timelines. Standard delivery in 2-3 weeks; expedited available when you're closing a round or need to issue options quickly.

Audit-Ready Documentation

Reports built to withstand Big Four scrutiny. When your auditors have questions, we have answers—backed by bulletproof documentation.

"We've worked with multiple 409A providers over the years. IQ Valuations stands out for their responsiveness and the quality of their analysis. When our auditors had questions, they handled everything seamlessly."
— CFO, Series C SaaS Company

Frequently Asked Questions

How much does a 409A valuation cost?

Pricing depends on your company's complexity—capital structure, stage, available data. Most early-stage companies pay between $2,000-$5,000. Contact us for a custom quote within 24 hours.

How long does a 409A take?

Standard turnaround is 2-3 weeks from receiving complete information. Expedited delivery (1 week or less) is available for time-sensitive situations like financing rounds.

What information do you need from us?

Cap table, recent financials, financial projections, details on recent transactions or material events, and background on your business. We provide a simple checklist to make gathering information easy.

How is common stock value different from my last round price?

Investors receive preferred stock with additional rights (liquidation preferences, anti-dilution, etc.). Common stock lacks these protections and is therefore worth less. The discount typically ranges from 20-60% depending on stage and capital structure.

What's "safe harbor" and why does it matter?

Safe harbor means the IRS presumes your valuation is reasonable unless they can prove otherwise—shifting the burden of proof. To qualify, the valuation must be performed by a qualified appraiser within 12 months of the grant date.

Can we use a previous 409A if we're about to close a round?

Generally yes, if the valuation is less than 12 months old and no material events have occurred. However, issuing options right before a round close can raise questions. We can advise on your specific situation.

What methodologies do you use?

We apply the approaches accepted by the IRS and AICPA: discounted cash flow (DCF), comparable company analysis, comparable transaction analysis, and for equity allocation, Option Pricing Model (OPM) or Probability-Weighted Expected Return Method (PWERM).

Will you support us if we get audited?

Absolutely. Your engagement includes support throughout the valuation period. If auditors or the IRS have questions, we're here to explain and defend our work.

Ready to Get Started?

Get your 409A quote within 24 hours. No obligation, no pressure.