What is a 409A valuation? Why is it important, and when do you need one?
Countless startup founders have asked these questions, and yet the answers remain frustratingly long and tedious. Like so many tax-related topics, 409A valuations are in desperate need of a rebrand. The term derives not from a jumble of numbers and letters picked from a hat, but from Section 409A of the Internal Revenue Code, which regulates nonqualified deferred compensation paid to plan participants.
Bored yet? Let’s break down the essential things you need to know about this complicated topic.