IRC Section 409A

High Quality
Low Overhead
Valuations with Value

A flawed valuation can have a devastating impact on a company and its option holders, as below market options are subject to ordinary income and payroll tax, plus a 20% federal excise tax, plus an additional 20% excise tax for California residents. Because these taxes are levied at vesting, option holders are liable for the tax regardless of their ability to sell the shares.

However, tax is not the only consideration. An unreasonably high valuation limits the value of equity as an incentive to employees and others. Additionally, a poorly prepared or inadequately documented valuation report may not survive audit review, requiring significant legal and accounting costs to defend the valuation after the fact.

Our clients rely on Financial Intelligence to get the valuation right the first time and to ensure that the valuation survives potential rigorous scrutiny from auditors, tax authorities and others. Here's how:

1. We are independent of management and maintain our independence carefully.
2. We are credentialed valuation experts.
3. We understand the relevant valuation rules and requirements.
4. We invest the time and energy to understand the relevant details of our clients' business, market, past performance and future expectations.
5. We maintain rigorous quality control over our analyses and documentation.
6. We integrate the IRC 409A and SFAS 123R valuations.
7. We ensure that our written reports comply with all relevant IRS regulations, accounting standards and the AICPA practice guide.
8. We communicate throughout the process with our clients to ensure that there are no surprises.