409A Valuation Services for Privately Held Startups & Growing Companies
What is a 409A Valuation And Why Do You Need One?
A 409A valuation determines the fair market value (FMV) of your company’s common stock, which is required by the IRS under Section 409A of the Internal Revenue Code. If your company issues stock options to employees, directors, or consultants, you must have a current 409A valuation to set compliant exercise prices.
Without a proper 409A valuation, your employees face immediate taxation on their stock options, a 20% additional penalty tax, plus interest charges. In Addition, The company will not be allowed to take deduction of compensation expense.
The good news? A professionally prepared 409A valuation provides “safe harbor” protection. When performed by qualified independent appraisers like CountSure’s team of CPAs and Chartered Accountants, the IRS presumes your valuation is correct, shifting the burden of proof away from your company in case of an audit.
Why Your 409A Value Is Lower Than My Preferred Stock Price?
Because the two numbers price two different securities. Your investors bought preferred stock carrying a liquidation preference and protective rights that are paid ahead of everyone else. A 409A prices common stock, which ranks last and has no market to sell into. A common value well below the round price is the normal outcome of a priced round – we see it on nearly every startup valuation that follows a raise.
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Valuation
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What it actually values
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Who requires it
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Where it usually sits
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409A common stock FMV
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A minority, non-marketable share of common stock, standing behind every preference
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The IRS, under Section 409A, to set option strike prices
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The lowest of the four
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Preferred round price
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The newest preferred series, with its liquidation preference, anti-dilution and protective rights
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Your investors and the priced-round term sheet
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The headline number, and the highest
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ASC 718 grant-date fair value
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The option award itself, expensed across the vesting period
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Your auditors, under US GAAP
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Built on the 409A common FMV as its input
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ASC 820 fair value
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Your investor's holding in your company, marked for their own reporting
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Fund auditors and LPs, through ASC 820 portfolio valuation
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Set independently by the fund, not by you
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There is no fixed ratio between a 409A common FMV and a preferred price. The gap depends on your preference stack, capital structure and exit outlook – which is why it has to be appraised, not estimated.
The preference stack is paid first
In most exits, preferred holders recover invested capital, plus any participation or dividend entitlement, before common sees a dollar. Every layer above common reduces what common is worth today.
There is no market to sell into
Preferred carries information rights, board representation and negotiated exit protection. Common carries transfer restrictions and no buyer. That illiquidity is quantified as a discount for lack of marketability.
Exits are weighted, not assumed
A preferred price reflects one investor's view of a strong outcome. A defensible 409A weighs the full range - an IPO, a modest M&A exit, a flat year, a wind-down - and allocates value across share classes.
Consequences of not getting a 409A Valuation Report
Cost of IRS Non-Compliance not getting a 409A Valuation:
- Immediate taxation for employees on option value
- 20% penalty tax on employees
- Interest charges accumulating from grant date
- Loss of company’s tax deduction
- Potential legal liability and employee relations damage
- Cost can easily reach hundreds of thousands or millions
Cost of a Defensible 409A Valuation:
- One-time investment of $2,500 - $10,000
- Complete IRS safe harbor protection
- Peace of mind for you and your team
- Foundation for compliant equity compensation
What Is a 409A Safe Harbor Valuation?
A safe harbor 409A valuation is one prepared using a method the Section 409A regulations recognise, which makes the resulting fair market value presumed reasonable. The IRS can still challenge it – but only by showing the valuation was grossly unreasonable, a far higher bar than simply preferring a different number. Without a safe harbor method, the burden runs the other way and your company has to prove its value was right.
It is a shift in who does the proving, not a certificate – and it is the reason a valuation belongs inside your valuation compliance reporting rather than being treated as a one-off errand.
Independent Appraisal Presumption
A written valuation by a qualified independent appraiser, dated no more than 12 months before the grant, with no material event since. This is the route almost every funded company takes, and the one investors and auditors expect to see in diligence.
Illiquid Start-Up Presumption
Available where the company has been in business under 10 years, has no publicly traded securities, and anticipates no change of control within 90 days and no public offering within 180 days. The valuation must be written and prepared by someone with significant knowledge and experience. The appraiser need not be independent.
Binding Formula Presumption
A fixed formula applied consistently to every transfer of that class of stock - including transfers back to the company and to any significant owner - not only to compensatory grants. It breaks the moment the stock trades in an arm's length deal.
Download Your CountSure 409A Valuation Report
Download your comprehensive 409A Valuation Report from CountSure and get a clear overview of your company’s valuation, methodology, financial analysis, and valuation conclusions. This report provides the essential insights needed for stock option pricing, equity compensation, and compliance purposes.
Who Needs 409A Valuation?
Is Your Private Company Required to Get a 409A Valuation?
If any of the following apply to your private company, you need a 409A valuation:
Seed to Series C Startups
Pre-IPO Companies
Entity Issuing Options
Companies Raising New Funding
Companies Planning M&A Transactions
PE-Backed Companies
Organizations Entrusting Us with Excellence
Get Your Free 30-Minute Consultation Today
Ensure your business stays compliant and ahead of the curve with reliable 409A valuations from our expert team. Schedule your free 30-minute consultation now to discuss your needs, understand the process, and receive guidance tailored to your company’s unique situation.
Countsure’s 409A Valuation Process
CountSure follows a rigorous, methodical approach to deliver defensible 409A valuations that stand up to IRS and auditor scrutiny. Here’s exactly what to expect when you work with us:
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Initial Consultation (Free)
We begin with a complimentary consultation to understand your company, equity structure, funding history, and valuation requirements. This helps us determine the right approach for your 409A valuation.
02
Data Collection & Engagement
Once you decide to proceed, we provide a detailed checklist of the financial, operational, and corporate documents required. After the engagement is signed and the initial payment is completed, our valuation team begins the analysis.
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Comprehensive Valuation Analysis
Once you decide to proceed, we provide a detailed checklist of the financial, operational, and corporate documents required. After the engagement is signed and the initial payment is completed, our valuation team begins the analysis.
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Draft Report Review
We prepare a comprehensive 409A valuation report and share the draft with you for review. You can ask questions, provide relevant clarifications, and discuss any business developments that may affect the valuation.
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Finalization & Delivery
After incorporating your feedback and completing our quality review, we finalize the 409A valuation report. The completed report is electronically delivered with the appropriate valuation conclusions and supporting analysis.
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Ongoing Support
We remain available to support you with valuation-related questions and future updates. When significant business events or financing activities occur, we can help you assess whether an updated 409A valuation may be required.
Why Private Companies Choose CountSure for their 409A Valuation Needs?
When your company’s IRS compliance and talent retention are on the line, you need a valuation partner you can trust. Here’s why CFOs, CEOs, and General Counsels choose CountSure:
The Only Firm You Need to Know
We’re not a software platform churning out automated reports. We’re not a Big 4 firm charging premium rates for junior associate work. CountSure delivers personalized, expert-led 409A valuations that combine:
Proven Track Record
Deep Expertise
Real Access
IRS Safe Harbor Compliance
Speed + Certainty
Whether you’re a pre-revenue startup or a late-stage growth company, our cross-industry experience (tech, healthcare, financial services, manufacturing) ensures accurate, defensible valuations.
Download the 409A Valuations Client Onboarding Checklist
Prepare all required financial and corporate documents in advance to ensure a smooth, compliant, and timely 409A valuation process.
Download the 409A Valuations Client Onboarding Checklist
Prepare all required financial and corporate documents in advance to ensure a smooth, compliant, and timely 409A valuation process.
Ready to Get Your IRS-Compliant 409A Valuation?
Schedule a free consultation with CountSure’s valuation experts. We’ll discuss your company’s specific needs, answer all your questions, and provide a transparent quote zero pressure, zero obligations.
What to Expect in Your Consultation:
- 30-Minute Expert Discussion
- Custom Timeline & Pricing
- All Questions Answered
- No Pressure Approach
- Zero Commitment Required
FAQ 409A Valuation
A: Generally every 12 months, or sooner if there’s a material event. Material events include new funding rounds, significant revenue changes, acquisitions, major product launches, or changes in your capital structure. Most startups update at fundraising and annually in between.
A: Without a compliant 409A valuation, you risk severe IRS penalties including immediate income tax for option holders, 20% penalty tax, and interest charges. Additionally, you’ll face challenges with auditors and potential shareholder lawsuits. It’s not worth the risk.
A: Yes. CountSure maintains a 100% Big 4 auditor acceptance rate. We strictly follow IRS safe harbor provisions, use defensible methodologies, and provide comprehensive documentation designed to withstand rigorous scrutiny from auditors and the IRS.
A: Our standard turnaround is 9-12 working days from receiving all necessary information. We can accommodate rush requests for urgent needs. The timeline depends on your responsiveness in providing data and the complexity of your capital structure.
A: We’ll need your cap table, financial statements (income statement, balance sheet, cash flow), latest funding documents (if applicable), financial projections, and details about your business model. We provide a complete checklist during onboarding to make the process smooth.
A: Yes. We’ve valued companies across technology, SaaS, healthcare, biotech, fintech, consumer products, manufacturing, and professional services. While we have particular strength in tech and IT sectors, our methodology adapts to any industry’s unique dynamics.
A: Absolutely. Through our parent firm My Valuation, we handle ESOP valuations, purchase price allocations, gift and estate tax valuations, financial reporting valuations (ASC 820), and M&A advisory work. Contact us to discuss your specific valuation needs.
