409A Valuation
What is a 409A Valuation?
A 409A valuation is an independent, IRS-compliant appraisal of the fair market value (FMV) of your private company’s common stock. Under Internal Revenue Code Section 409A, companies must establish the FMV to set the exercise price of stock options granted to employees, advisors, and founders.
A qualified 409A valuation helps you avoid severe tax consequences, penalties, and IRS challenges. If you plan to issue equity compensation, you must document your stock’s fair market value through a credible 409A valuation firm.
Why Your Business Needs a 409A Valuation
Any private company that issues stock options or other equity awards needs a 409A valuation to stay in compliance with IRS regulations.
Without an accurate and defensible 409A valuation report, you and your employees face serious tax risks:
Immediate Income Tax Liability – Employees could owe ordinary income tax on the value of unexercised options.
20% IRS Penalty Tax – On top of the income tax, the IRS adds an additional 20% penalty.
Interest Penalties – Interest accrues from the vesting date.
State Taxes and Penalties – Some states impose additional penalties.
Investor and Auditor Scrutiny – Non-compliance can derail fundraising or M&A.
A professional, safe harbor 409A valuation ensures your option grants are protected and tax-compliant.
Risks of Inaccurate 409A Valuations
Failing to get a qualified 409A valuation can have severe consequences for your team. If your valuation is too low or prepared improperly, here’s what can happen:
Employees Pay Immediate Taxes – The IRS may treat options as taxable income the day they vest.
20% Federal Penalty – A significant penalty applies automatically.
Accrued Interest Charges – Backdated interest further increases the tax burden.
No Exceptions for Mistakes – Even honest errors can trigger penalties.
Example:
If you grant options priced at $0.50/share and the IRS later determines the FMV was $1.50/share, employees could owe taxes and penalties on the $1.00/share difference, even if they never sold any shares.
Your employees trust you to get this right—protect them by working with an experienced 409A valuation provider.
What is Safe Harbor 409A Valuation?
The IRS offers safe harbor protection for companies that follow approved valuation methods. The most common is the Independent Appraisal Method, which requires using a qualified, independent valuation firm.
Safe Harbor Benefits:
Presumption of Reasonableness – The IRS assumes your valuation is accurate.
Burden of Proof Shifts to the IRS – The IRS must prove your valuation was grossly unreasonable.
Reduced Audit Risk – A safe harbor 409A valuation protects your company and employees from penalties.
Wyckoff Valuation prepares all reports to meet or exceed IRS and AICPA standards for safe harbor compliance.
How Wyckoff Valuation Delivers a Credible 409A Report
Wyckoff Valuation specializes in high-quality, audit-ready 409A valuations for startups and private companies.
Why choose our 409A valuation services?
30+ Years of Expertise – Decades of experience with Big 4 auditors, venture-backed startups, and growth-stage companies.
Fixed-Fee Pricing – No hourly surprises, just clear, predictable costs.
Defensible, Detailed Reports – Every valuation meets safe harbor standards and withstands investor and auditor reviews.
Senior-Level Support – Your valuation is handled by experienced professionals.
Fast Turnaround – Get your 409A valuation report quickly without sacrificing accuracy.
When you need a credible valuation, Wyckoff Valuation is your trusted partner.
What Our 409A Valuation Costs
Our transparent fixed-fee 409A valuation pricing is designed for startups and scaling companies:
Early-Stage Startup: Starting at $500 to $1,500
Growth-Stage or Recurring Revenue Business: Starting at $500 (with recent rounds) to $1,500
Each 409A valuation engagement includes:
A full, audit-ready, and defensible valuation report and schedules
Supportable valuation models and assumptions
Management interviews and data review
Post-delivery support for auditor questions
Get a 409A Valuation You Can Trust
Avoid compliance headaches, tax penalties, and employee dissatisfaction.
Wyckoff Valuation delivers IRS-compliant, safe harbor 409A valuations with transparent pricing and reliable service. Whether you’re a seed-stage startup or preparing for an exit, we help you stay protected.
