409A Valuation for US Private Companies: Report Scope, Refresh Events and Adviser Handover

Compare Carta, BPM and AngelList Build

Start by specifying the common-stock FMV report, effective date, refresh process and adviser handover needed for the company’s option grants. Then compare the providers’ published delivery models and the written scope they offer; a platform bundle alone does not establish suitability or IRS acceptance.[1][2][5][6][7]

Carta

Delivery model: Carta includes 409A valuations with its cap-table-management subscription.[2]

Review support: Carta describes in-house valuation analysts, draft review and a sample report; its statements about audit-defensible reports and performance are vendor claims.[2]

Suited to (provider description): Companies seeking an integrated cap-table and valuation workflow designed to scale from an initial valuation through later stages.[2]

BPM

Delivery model: BPM presents qualified-appraiser valuation services focused on US tax, accounting and regulatory requirements.[5]

Review support: BPM says it supports FASB requirements, financial audits and SEC processes.[5]

Suited to (provider description): Companies anticipating ASC 718 work, financial-audit review or possible SEC scrutiny.[5]

AngelList Build

Delivery model: AngelList Build combines 409A valuation with equity management.[6]

Review support: The cited page does not state its audit-review scope, response commitments or revision limits.[6]

Suited to (provider description): Startups combining employee-option pricing with equity administration.[6]

Specify a grant-focused report and evidence pack

A grant-focused engagement determines the fair market value of private-company common stock rather than simply adopting a preferred-share fundraising price. For nonpublic stock, 26 CFR 1.409A-1(b)(5)(iv)(B) sets a reasonable-valuation framework; counsel should confirm that the planned stock right and valuation method satisfy the applicable conditions.[1][7]

This is different from reproducing the preferred-stock price from a financing. A fundraising valuation prices preferred shares, which may have liquidation preferences and other rights absent from common stock.[2][4][6]

Define the requested deliverable as a written valuation analysis identifying:

• The legal entity and valuation date.
• The intended use for common-stock option grants.
• The concluded common-stock FMV per share.
• The methods, assumptions and equity-class allocation.
• The support available for questions from accountants, auditors or counsel.[2][4][5][6]

Obtain the valuation before the first common-stock option grants. Carta frames this specifically for grants to US tax residents, while J.P. Morgan and AngelList discuss grants to employees, consultants, directors, advisers or other recipients.[2][3][6]

The evidence pack can include the current certificate or articles of incorporation, capitalization table, pitch deck or board materials, historical financial statements, profit-and-loss results, forecasts, cash and debt projections, bank statements, financing or share-purchase documents, anticipated grants and material developments since the previous valuation.[2][4][6] Include possible IPO or M&A timing because expected liquidity and transaction scenarios can affect the analysis.[2][4][6]

Assign an internal owner and version date to each submission so the provider and advisers can identify the cap table, forecast and transaction evidence supporting the conclusion.

Set the kickoff, draft review and delivery process

Carta describes three operational stages: document gathering, a kickoff discussion and draft review before finalization.[2]

1. Collect: Transfer the approved evidence pack with filenames and version dates identifying the cap table, forecasts, financials and transaction documents used.[2][4][6]
2. Kick off: Confirm the valuation date, grant timetable, financing history, material developments, forecast version, outstanding securities and plausible liquidity scenarios. These inputs can affect enterprise value and its allocation among equity classes.[2][4]
3. Review the draft: Reconcile share counts, security rights, financial periods, financing terms and management forecasts to the submitted evidence. Carta describes draft review as a factual-accuracy check.[2]

Set the correction process in the engagement terms. Require the provider to distinguish factual corrections from requests requiring new analysis and to explain which requests count toward any revision limit. The final package should identify its effective date and be ready for board review.

Turn material events into an early-refresh policy

The current regulation does not treat a valuation as a guaranteed 12-month entitlement. A previously calculated value is unreasonable for later use if it omits subsequently available information material to company value, or its valuation date is more than 12 months before the relevant use. Apply that rule to the grant date and assess material changes sooner.[1][7] Provider annual-update guidance is an operational starting point, not a substitute for this test.[2][5]

Monitor two groups of potential triggers:

• Capital and transaction events: Priced financings, SAFEs or convertible notes, qualifying secondary common-stock sales, recapitalizations, acquisition offers or credible term sheets, and credible IPO, merger or acquisition activity.[2][4][5][6]
• Operating events: Significant positive or negative outlook changes, revised forecasts, major customer contracts, strategic partnerships, new products and missed milestones.[2][3][4] Business-model shifts and regulatory changes are additional potential triggers.[5][6]

Record each event, its date and the assumptions it may affect, then assess whether it could change common-stock value. If materiality is uncertain, consult the valuation provider or counsel before additional grants. The cited guidance provides neither a universal materiality test nor a definition of when a secondary sale is “qualifying.”

For a company credibly approaching an IPO, Andreessen Horowitz suggests quarterly or monthly updates; this is practitioner guidance based on circumstances, not a universal cadence.[4]

Review the assumptions driving common-stock FMV

Start with the valuation mechanics rather than the final per-share figure. Reconcile enterprise value to the method identified in the report:

• Market approach: Trace recent financing and comparable-company evidence into the analysis, including backsolve assumptions.[2][4][5]
• Income approach: Compare projected cash flows, growth assumptions and discount rates with the approved forecast and management expectations.[2][4][5]
• Asset approach: Verify the stated net assets or replacement-cost inputs against company records.[2][4][5]

Next, inspect how enterprise value is allocated among preferred stock, common stock, options and warrants. Confirm the report reflects the securities’ rights and applies its stated allocation method—such as OPM, OPM backsolve, PWERM or a hybrid—consistently.[2][3][4][5]

For scenario-based analyses, challenge the assigned probabilities and financing or liquidity assumptions. For market analyses, examine the selected comparable companies rather than accepting the peer set without review.[2]

Review the discount for lack of marketability against company stage, expected liquidity timing, trading restrictions and the selected evidence. The regulation identifies marketability discounts among potentially relevant valuation factors; it does not prescribe a standard discount percentage. Require the report to explain the company-specific adjustment rather than adopt a vendor’s typical range.[1][7]

Finally, confirm the common-stock FMV per share and valuation date before approval.[2]

Package the report for board and adviser review

Route the latest FMV to the board before issuing new options. Carta and AngelList recommend board approval before grants, and Carta describes formal board approval as a requirement.[2][6]

Keep a handoff package containing:

• The final report and effective date.
• Board materials and the approval record.
• The cap-table and forecast versions used.
• Key financing or transaction evidence.
• Unresolved questions for counsel, accountants or auditors.

Include an assumption summary covering enterprise value, the equity-allocation method, discount for lack of marketability, comparable companies, discount rates and final common-stock FMV per share.[2] Record the next review date and assign responsibility for monitoring material events.

The regulation provides specified presumptions of reasonableness, including a qualifying independent appraisal, subject to its conditions and the Commissioner’s rebuttal standard. Purchasing an independent report does not guarantee a safe-harbor outcome or IRS acceptance. Counsel and the company must check whether the chosen method and its application meet the relevant conditions.[1][7]

What to confirm with each provider

The cited pages do not provide comparable fixed report prices, taxes or extra fees, delivery guarantees, revision limits, support response times, engagement and renewal terms, cancellation or refund rights, service-level commitments, city- or state-level coverage, or independent comparative evidence of accuracy, audit success, IRS challenge rates, turnaround or cost advantages; Carta says valuation is included with its cap-table subscription without showing the subscription price, BPM says cost varies with complexity without stating its fee, and the cited AngelList page does not state its Growth-plan price.[2][5][6]

• Price: Request an all-in quote identifying taxes, extra fees, update charges and any required platform subscription.
• Delivery: Confirm the target turnaround, whether it is guaranteed and what the final package includes.
• Revisions: Confirm the number and scope of draft revisions and the treatment of factual corrections.
• Support: Ask who handles questions from accountants, auditors, counsel, the IRS or the SEC, along with support hours and response targets.
• Contract: Obtain the engagement length, renewal mechanism, cancellation or refund rights and any service-level commitment.

Also verify independence, relevant credentials, experience with the company’s industry and stage, accepted methods, written analysis and willingness to support adviser or regulatory review.[2][4][5][6]

References

1. IRS Internal Revenue Bulletin 2007-19: final Section 409A regulations, T.D. 9321 (irs.gov)
2. What is a 409A Valuation? Key Concepts & Process (carta.com)
3. 409A Valuations: A Guide for Startups | J.P Morgan (jpmorgan.com)
4. 16 Things to Know About the 409A Valuation | Andreessen Horowitz (a16z.com)
5. 409A Valuation Explained | Compliance, Timing and Requirements (bpm.com)
6. What is a 409A Valuation? | AngelList Education Center (angellist.com)
7. 26 CFR 1.409A-1(b)(5)(iv)(B): nonpublic-stock valuation and reasonableness (ecfr.gov)