409a Valuation

A 409A valuation determines the fair market value (FMV) of a private company’s common stock, as required by U.S. tax law (Section 409A). It’s essential for Indian startups with U.S. employees, investors, or U.S.-based stock option plans to price stock options compliantly and avoid IRS penalties.

It’s named after Section 409A of the U.S. Internal Revenue Code, which sets rules for pricing stock options and other equity compensation in private companies to ensure fair taxation.

A 409A valuation is a formal, IRS-compliant appraisal of a private company’s common stock FMV, used to price stock options and avoid U.S. tax penalties. A VC valuation is an informal estimate of the company’s overall value, often for preferred stock, negotiated during funding rounds with venture capital firms.

409A मूल्यांकन एक निजी कंपनी के साधारण स्टॉक का उचित बाजार मूल्य (FMV) निर्धारित करता है, जैसा कि अमेरिकी कर कानून (सेक्शन 409A) में आवश्यक है। यह उन भारतीय स्टार्टअप्स के लिए जरूरी है जिनके पास अमेरिकी कर्मचारी, निवेशक, या स्टॉक ऑप्शन प्लान हैं, ताकि IRS अनुपालन सुनिश्चित हो।

A 409A valuation uses standardized methodologies to calculate a defensible fair market value (FMV) for common stock, often lower than VC valuations due to discounts for lack of marketability. This ensures IRS compliance and allows startups to offer affordable stock options to employees.

A 409A valuation is an independent appraisal of a private company’s common stock FMV, required by the IRS for Indian startups with U.S. employees, investors, or stock option plans. It ensures stock options are priced correctly, avoiding tax penalties for the company and employees.

Indian startups issuing stock options to U.S. employees, raising funds from U.S. investors, or planning U.S. expansion need a 409A valuation to comply with IRS rules and protect employees from tax penalties.

A 409A valuation should be updated every 12 months or after significant events like a new U.S. funding round, acquisition, or major shift in business strategy affecting your stock’s value.

You’ll need your cap table, financial statements, pitch deck, company charter, recent funding documents (if any), board consents, and financial projections. Indian startups can submit MCA-compliant formats—we’ll handle the rest.

ezyLegal delivers your IRS-compliant 409A valuation in 3–5 business days, thanks to our streamlined process and expert team.

Early-stage Indian startups need a 409A valuation only if they issue stock options to U.S. employees or have U.S. investors. For Indian ESOPs, we provide Registered Valuer reports to meet MCA compliance.

ezyLegal provides a hassle-free process, 3–5 day turnaround, expert support, transparent pricing, and IRS-compliant reports. Our dual expertise in U.S. and Indian valuations ensures seamless compliance for startups going global.

ezyLegal uses secure online systems to protect your sensitive financial and corporate data throughout the 409A Valuation process.

Without a 409A valuation, Indian startups with U.S. stock options risk IRS penalties, including immediate taxation and fines for employees. For Indian ESOPs, we ensure compliance with MCA rules instead.

Absolutely. We provide IRS-compliant 409A valuations for U.S. stock options and Merchant Banker/Registered Valuer reports for Indian compliance, making us your one-stop solution for global and local needs.

A 409A valuation meets U.S. IRS standards for pricing stock options, while Indian valuations (e.g., by Registered Valuers) comply with MCA or FEMA for ESOPs, fundraising, or share transfers.

Yes, we provide 409A valuations for U.S. compliance and Merchant Banker/Registered Valuer reports for Indian regulations.