Unlike public companies where value is set by the market, private companies use independent appraisers to assess their value. Issuing equity as compensation is a relatively simple process, but due to regulation in the IRC Section 409A created by the American Jobs Creation Act of 2004, employers are not permitted to issue options with an exercise price they simply pick. An IRS Section 409A valuation is an independent appraisal of the Fair Market Value (FMV) of a private company’s common stock that determines the “strike price” for equity.
KK Valuation Services provides independent third-party valuations for IRC 409A and ASC 718 (previously FAS 123R) compliance. To determine value, our professionals analyze each client’s business and financial plans, history, projections, and comparable companies and transactions. Our professional team has performed 300+ such engagements to value securities and options for tax, financial reporting, litigation and other purposes.