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409(a) Valuation: The Short Answer
One paragraph, then a pointer to exactly the guide you actually need.
Handle your 409A as part of formation and cap table setup, not a separate errand.
A 409(a) valuation is an independent appraisal that sets the legally defensible fair market value of your company's common stock, used to price employee stock option grants. Every U.S. private company that grants options needs one — the question is almost never "what is it," but something more specific.
Where to Go From Here
If you're asking when you need a new one, see the trigger-event breakdown below. If you're asking about price, timeline, or how it relates to fair market value specifically, those are each their own detailed question with a different answer depending on your situation.
- What triggers a new one — new round, 12 months elapsed, or a material change
- What it costs — depends heavily on stage and cap table complexity
- How long it takes — one to two weeks standard, faster for a rush fee
Frequently Asked Questions
What is a 409(a) valuation, in one sentence?
It's an independent appraisal that sets the fair market value used to legally price your company's stock option grants, required under IRS Section 409A.
- Required for any private company issuing stock options
- Performed by an independent, qualified appraiser
- Expires and must be refreshed on specific triggering events
Why does 409(a) valuation matter for startup founders specifically?
Without a current 409A, you can't legally price new option grants without risking IRS penalties for both the company and the employee receiving the grant. It's a prerequisite for hiring with equity, not an optional compliance step.
- No current 409A means no defensible option pricing
- Penalties can fall on the employee, not just the company
- It's required before your first option grant, not after
The Lovie Advantage
Internal Link: Lovie Cap Table Management treats your 409A as a connected part of your formation and equity setup — not a separate line item you have to remember to order on your own.
Want the deeper answer to your specific question? See Internal Link: What Is a 409A Valuation, and When Do You Need One for trigger events, or check pricing and timeline in the related guides linked above. For the statutory source, IRS Tax Topic 427 on the treatment of stock options is the primary reference.
Get Your Company's 409A Sorted
Handle your 409A as part of formation and cap table setup, not a separate errand. Start Free with Lovie