409A Valuations | Startup Equity Matters with Matt Secrist
409A valuation is an evaluation that determines the FMV or fair market value of a private company's common stock in compliance with Internal Revenue Code (IRC) section 409A. It basically determines how much it costs to buy stock in your company. It sets the strike price any option-holders must later pay to gain ownership of their stock.
Audit-proof 409A valuations for startups https://www.cakeequity.com/features/409a
On this episode, Jason Atkins (Co-founder and President of Cake Equity) and Matt Secrist discussed 409A regulations in the context of stock options.
Important timestamps:
0:05 Simple stock options? Understanding ISO and NSO with Matt Secrist
1:01 Granting the option to the employee or contractor
1:24 Do the 409a which establishes the exercise price
1:43 Setting the working exercise price will create massive tax problems
2:41 Breach of Florin
3:16 Risk of an IRS audit
3:20 409a value violation
References:
409A valuation, explained https://www.cakeequity.com/guides/409...
Jason Atkins (Co-founder and President of Cake Equity) https://www.cakeequity.com/jason-atkins