409A Valuation

A 409A Valuation an appraisal of a private company’s stock, and is used to determine the fair market value of that stock, usually for a startup. Section 409A of the Internal Revenue Code governs what is called nonqualified deferred compensation, which is compensation that is earned in one year but paid in another year. Founders will typically get a 409A Valuation for their company in order to accurately price stock options.