Do I need a 409A Valuation if my company Recently Sold Sstock? If the Company recently sold common stock and has a simple capital structure (i.e. one class of equity), then a recent sale to an unrelated party may be adequate to support the pricing of stock options.  If the company recently sold preferred stock, and the options are to acquire common stock, an allocation method such as the option pricing method can be used to figure out the fair market value of the of the common stock underlying the options.

Does a Private Company need a 409A? While the IRS does not require a company to obtain a valuation report from an independent specialist, a private company that has issued stock options and does not have recent sales of shares identical to those underlying options should engage an independent specialists to address risk of non-compliance that could adversely impact employees, auditors, investors, creditors and owners. 

Can I use the 409A Valuation Report for Financial Reporting? Yes, except in rare instances, the conclusions reached in the 409A Valuation Report would not differ from a conclusion of value reached under the fair value (US GAAP) standard of value.  The report should include sufficient information and date to allow for a financial statement auditor to perform adequate audit procedures related to amounts include in the financial statements and disclosures.

Can I use the 409A Valuation Report to determine a sales price for my business? No.  While the information and conclusions reached are relevant to the Company's over all value. there are additional factors that should be analyzed in degerming a potential sales price of the entire eEnterprise, including but not limited to, potential buyer synergies, deal structure, operational efficiencies, and seller objectives.  See our seller assistance page here.