top of page

ESOP Valuations - IRC 409A

Section 409A of the United States Internal Revenue Code (IRC) regulates nonqualified deferred compensation paid to servicer providers. When you issue stock options or stock appreciation rights (SAR) to your employees, board members or service providers, strike price of these options or SAR is established by common stock valuation. Failing to comply with the IRS guidelines, may be costly for your service providers and employees given the tax and penalties in case of non-compliance.

Estimating fair value of common stock for a private company may be a daunting task given the differential rights of preferred shares in the capital structure. In case stock options or SARs are issued at a discount, i.e., strike price below the fair value of underlying common stock, this calls for a non-compliance and a trigger event for IRS to act; which you shall consider avoiding.

Our team specializes in IRC 409a valuation with many years of experience working with private companies, ranging from early start-up to large private corporates (near being public).

1911.i105.048.isometric tax accounting horizontal banners-ai.png

Understanding YOU

First step of 409a is valuing your company as a whole. We discuss company’s operating status, future plans and business risks with the management. This discussion forms as a base of valuation methodology and is a crucial part part while finalizing market assumptions.


Specialized team

We have a specialized team for 409a, who tries to understand your business, stage of growth, and future prospects, along with understanding the intricacies of 409a valuation. Based on your stage of business, rights and preferences of preferred and equity shares, we determine the best valuation methodology which may be appropriate.


Quality Cost effective

While working with utmost quality, we offer our services in the most cost-effective manner. We ensure that compliance requirement shall not hit your cash-flows.


Audit Support

Our support and services don’t stop after valuation, we also provide full audit support with respect to any queries your audit has with respect to valuation performed by us.


Importance of 409A with EquitAdvisors


Finalizing a 409a analysis is very essential to ensure the options are granted on tax-free basis. Typically, a refreshed 409a analysis is required on an annual basis or after any material event in your company or industry which may impact the value of company or equity.

409a review is one of our specialization and USP, given the vast experience we had in 409a industry. Our support includes the audit support your team requires at time of any audit review. Please get in touch to understand the process in details.

bottom of page