What is a 409 Valuation ? - Greener Equity, Inc

Greener Equity is a leading provider of IRC 409A and ASC 505/718 (previously FAS 123R) valuation services to growing private companies. Greener Equity has performed numerous 409a valuations since Section 409a was added to the Internal Revenue Code over five years ago. We work with leading law firms, accountants, venture capital firms and their portfolio companies. Big Four accounting firms such as Ernst & Young and leading regional accounting firms such as Tanner LC endorsed our 409a valuations.

Greener Equity has the specific experience, expertise, and client care focus that makes us the preferred valuation firm of many growth equity companies. In addition, our fair and competitive pricing for our top quality valuations makes us the outstanding choice for valuation services.

More about 409A

Information for 409A

1. Most recent balance sheet, income and cash flow statements

2. Monthly Revenue and EBITDA for the last twelve months

3. Historical financial statements for the past 3-5 years if available

4. Financial projections for the next 5 years

5. Capitalization table, history of the company's financing--Round

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Simple Guide To 409A

Section 409a was added to the Internal Revenue Code on January 1, 2005. However, as with many such regulations the actual “effective date” of 409a regulation was January 1, 2007. Since then, companies that grant deferred compensation, i.e. options, must comply with Section 409a.Read more…

Asset Or Cost Method

The asset or cost method essentially establishes the fair market value of a business by modifying the asset and liability balances on their balance sheet to the Company's corresponding fair market value. This method is usually derived by first adding up the individual values of a Company's primary assets.Read more…

Market Method

The market method to business valuation is historically rooted in the economic principles of competition that suggests that in a free market — buyers will not pay more for a business, and the sellers will not accept less, than the price of a comparable business enterprise. It is similar, in many respects, to the “comparable sales” method that is commonly utilized in real estate appraisals.Read more…

Income Method

The income method to valuation is essentially an estimate of the present value of the estimated future monetary benefits to the new owners of a business. Consequently, this method requires a projection of the cash flows that the business is expected to produce. Using the discounted cash flow method (“DCF”), these cash flows are subsequently converted to their present value using a specific discount rate that factors in the time value of money and any measurable level of risks associated with the business.Read more…

VC Based Method

The First Chicago or venture capital-based method combines elements of both income and market method. This method applies current market comparables of a market method to the future Company results of income method. This valuation is discounted to its present value equivalent at an appropriate discount.Read more…

Valuation Adjustments

In general, the value of a Company's equity securities typically requires an adjustment to account for the security’s lack of a readily available market in which it can be sold. In addition, practical evidence suggests that the discount for the lack of marketability (of an unregistered, closely held, non-controlling interest) should take into account financial risks, performance issues, resale restrictions, and other potential liabilities.Read more…

Origin

Section 409A was added to the Internal Revenue Code to regulate deferred compensation issued to employees and service providers. These new regulations stipulate that if stock options are issued with an exercise price less than the fair market value of the underlying stock, all deferred income is immediately recognized along with a 20% penalty tax. To avoid this issue, the IRS has established safe harbor methods to avoid the issuance of stock options below fair market value. The most defensible way to comply with the safe harbor requirement is for an independent appraiser to value the company's common stock.  Read more…

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CAP TABLE MANAGEMENT
Ready access to the latest cap table version and legal documents for management, investors and attorneys.
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409A VALUATION
Comply with Internal Revenue Code (IRC) Section 409A tax regulations governing deferred compensation.
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OPTION EXPENSING
Comply with GAAP ASC Topic 718 (formerly FAS 123R) by properly expensing options.
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