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409A Compliance Checklist

Assemble all financial documentation for the year

Request recent cap table from finance department

Record all option grants and stock sales within the year

Compile a list of market comparable transactions

Determine any material events that impacted company’s operations

Prepare all necessary transaction documents for valuation analyst

Schedule a meeting with the valuation analyst

Provide all necessary information to the valuation analyst

Review preliminary valuation report from analyst

Approval: Preliminary Valuation Report

Provide feedback and necessary adjustments to analyst

Receive final valuation report from analyst

Review final valuation report

Approval: Final Valuation Report

Document and store the final 409A valuation report and resulting calculations

Update cap table with new valuations

Notify relevant employees and investors of new valuations

Ensure compliance with IRS and audit requirements

Schedule next 409A valuation process

Assemble all financial documentation for the year

Gather all financial documents from the past year, including income statements, balance sheets, and cash flow statements. These documents are essential for the valuation analyst to assess the company's financial performance and determine a fair market value for its stock options. Make sure the documents are organized and easily accessible.

Financial Documents

Request recent cap table from finance department

Reach out to the finance department and request the most up-to-date capitalization table (cap table). The cap table provides a detailed overview of the company's ownership structure, including the names of shareholders, the number of shares they hold, and any option grants or stock sales. It is crucial to have the latest cap table to accurately determine the value of the company's stock options.

Cap Table Checklist

1

Verify shareholder names and shareholdings
2

Check for any recent stock sales or option grants
3

Confirm accuracy of cap table totals

Record all option grants and stock sales within the year

Document all stock options granted to employees and any stock sales that occurred during the year. This includes the names of the recipients, the number of options granted or shares sold, and the exercise or sale price. Keeping detailed records of these transactions is important for the valuation analyst to understand the company's equity-related activities and make accurate valuations.

Option Grants and Stock Sales Checklist

1

Record names of option recipients
2

Note number of options or shares granted or sold
3

Document exercise or sale price

Compile a list of market comparable transactions

Research and compile a list of recent market comparable transactions, where similar companies in the industry have raised funding, undergone acquisitions, or been sold. This information provides valuable context for the valuation analyst to assess the market value of the company's stock options. Consider factors such as industry, stage of growth, and geographic location when selecting comparable transactions.

Market Comparable Transactions