409A Valuation
A 409A valuation is an independent appraisal of a private company's common stock, used to set the exercise price of stock options under IRC §409A. A qualifying independent appraisal is presumed reasonable for grants made within 12 months of its valuation date.
Signed by a credentialed analystFairMarketValue
Northline Software, Inc.
At a glance
- Basis
- IRC §409A and Treas. Reg. §1.409A-1(b)(5)(iv)(B)
- Prepared by
- A credentialed FMV valuation analyst
- Deliverable
- Signed report (PDF)
- Used by
- Accounting firms
- Delivered to
- The ordering bank's or firm's vault and the client's vault
When it is needed
- Before a board grants stock options.
- After a financing round or other material event.
- Annually, to keep the safe harbor current.
What the report contains
- Common stock fair market value per share
- SAFEs, notes, and warrants modeled on their terms
- Signed report for board adoption
- Twelve months of coverage, refreshed after a material event
Last updated October 24, 2026
Standards and sources
- Treas. Reg. §1.409A-1(b)(5)(iv)(B)
- Independent appraisal presumption
- AICPA Accounting and Valuation Guide
- Valuation of privately held company equity securities
Documents we need
- Cap table
- Articles of incorporation
- Financial statements
- Most recent financing terms
How an engagement works
Scope
We confirm the purpose, standard of value, valuation date, and addressee, then issue the engagement letter.
Intake
You or your client upload documents against a checklist. Open items stay visible until the file is complete.
Analysis
A credentialed analyst prepares the valuation and signs the conclusion.
Delivery
The signed PDF goes to your vault and your client's. We keep the workfile for later questions.
409A valuation questions
What is a 409A valuation?
A 409A valuation is an independent appraisal of the fair market value of a private company's common stock, used to set the exercise price of stock options so the options are not treated as deferred compensation under IRC §409A. FairMarketValue (FMV) delivers it as a signed report for board adoption.
How long is a 409A valuation valid?
An independent 409A valuation is presumed reasonable for option grants made within 12 months of its valuation date, unless a material event, such as a priced financing round or an acquisition offer, changes the company's value sooner.
What is the 409A safe harbor?
The 409A safe harbor is the presumption of reasonableness in Treasury Regulation §1.409A-1(b)(5)(iv)(B)(2). When a qualified independent appraiser performs the valuation, the IRS can overturn it only by showing the method or its application was grossly unreasonable.
What happens if options are granted below fair market value?
Options granted below fair market value can fail IRC §409A. The employee may then owe income tax on the deferred amount as it vests, a 20 percent additional tax, and interest.
How does a 409A valuation treat SAFEs, convertible notes, and preferred stock?
A 409A valuation models SAFEs, convertible notes, warrants, and each class of preferred stock on their actual terms, then allocates equity value across the capital structure to arrive at the common stock value per share.
What documents does a 409A valuation require?
A 409A valuation requires the cap table, articles of incorporation, financial statements, and the terms of the most recent financing.
How is the fee for a 409A valuation set?
FMV quotes the fee for a 409A valuation after reviewing the scope. The fee is fixed before work starts and does not depend on the conclusion of value.
Trust and reliability
SOC 2 Type II and ISO 27001 audits are underway. Our security program is documented in the FMV Trust Center.
Get a fixed-fee quote
Tell us the purpose, the company, and the valuation date. We confirm scope and quote a fixed fee before work begins.