What is 409A Valuation? – altshare

Why Do You Need a 409A Valuation?

If your company plans to issue stock options or equity-based awards to U.S.-based employees, contractors, or advisors, you are required to obtain a 409A valuation. This is an independent, third-party assessment that determines the Fair Market Value (FMV) of your company’s common stock and establishes the compliant exercise price for your equity grants.

In simple terms, a 409A valuation ensures your option pricing is aligned with U.S. tax regulations and reflects a defensible, market-based value under Section 409A of the U.S. Internal Revenue Code.

Beyond compliance, a 409A valuation plays a critical role in protecting both the company and its stakeholders. It helps mitigate the risk of potential tax penalties for employees and service providers, while also giving founders, boards, and investors' confidence that equity compensation is structured correctly, consistently, and in line with accepted market practice.

When Is a 409A Valuation Required?

Before your first employee options grant – to ensure full compliance from day one
At least once every 12 months – or sooner if a new valuation is triggered within that period
After material business events – such as fundraising rounds, secondary transactions, equity financings, or significant changes in revenue, capital structure, business model, or operations

What Does a 409A Report Include?

A 409A valuation is determined based on:

Capitalization structure – fully diluted ownership and equity breakdown
Financing history & investor terms – recent rounds and key deal terms
Financial performance & projections – historical and forecasts
Market comparables – public company benchmarks
Stage & liquidity framework – growth stage and exit considerations

The final output is an audit-ready report that defines the FMV of your common stock and sets a defensible strike price for your equity grants.

What Happens If You Don’t Get One?

Failing to obtain a valid 409A valuation can result in:

Tax penalties for employees and contractors
Retroactive income tax and interest charges
IRS audit risk and regulatory exposure
Delays or complications in fundraising and M&A transactions

Key Benefits of Using altshare for Your 409A Valuation

altshare delivers a fully digital 409A valuation experience designed for modern startups - combining speed, accuracy, and transparency in one seamless workflow.

Streamlined digital process – Replace manual forms, email chains, and repetitive requests with a guided, in-platform experience that keeps everything simple and efficient
Live cap table integration – Your valuation is built directly on your up-to-date cap table, reducing manual work, duplication, and data errors
Fast turnaround time – Receive an audit-ready 409A valuation report in as little as 7 business days
Enterprise-grade security – Your data is protected with robust encryption and SOC 3-aligned security standards
Built-in collaboration – Communicate directly with our valuation team, ask questions, and leave comments, all within the platform
Full transparency & control – Track every submission, file, and update in one place with complete visibility and no version confusion