The 409A Valuation Explained: A Guide for Founders

Who performs a 409A valuation? Independent, qualified appraisers or specialized valuation firms typically perform 409A valuations, since using an independent third party is required to qualify for IRS safe harbor protection.

How long is a 409A valuation valid? Generally 12 months, unless a material event such as a new funding round or major business change happens sooner, which would require an updated valuation.

What happens if a startup skips its 409A valuation? Without a valid valuation, options may be considered mispriced under IRS rules, which can result in penalties for the company and immediate tax liability for employees holding those options.