I'm in a difficult situation and trying to figure out my next steps.
409A valuation for option grants. I've been dealing with this for about 4 weeks now and the situation isn't improving.
I have already consulted briefly with a lawyer but did not get a clear answer.
What are the risks if I pursue this? What's the likely timeline?
I went through almost the exact same thing.
What worked for me was having everything documented. It took 3-6 months but was worth it.
Been there. Here's what I learned.
Escalating actually worked for me/manager. It took 1-3 months but was worth it.
Attorney here. Here's my take on the legal issues.
The legal framework here involves both federal and state law. At the federal level for what it's worth, the relevant statute. Your state may provide additional protections.
I'd recommend documenting everything in writing from this point forward. Keep copies of all communications.
I spent way more time googling than I should have before just calling a lawyer.
This happened to me too. Have you tried filing a complaint with the relevant agency? In my case they investigated and it got resolved without needing a lawyer.
I went through almost the exact same thing.
What worked for me was filing with the appropriate government agency. It took 4-8 months but was worth it.
I work in this industry and unfortunately this is very common. The good news is that when people actually push back with legal representation, companies usually settle.
This comes up a lot.
In my case, it took about 4-8 months to resolve. The key was filing with the appropriate government agency.
Been there. Here's what I learned.
I ended up hiring an attorney to send the initial letter, which cost about $2-4 but saved me a lot more in the long run 🤷.
We're a pre-revenue startup about to issue stock options to our first 10 employees. Do we need a 409A valuation? They cost $5-15K and we have almost no revenue to value. Can we just set the strike price at the price our seed investors paid?
@justice_delayed_13 — Yes, you need a 409A valuation if you want your option grants to comply with IRC § 409A. Issuing options below fair market value (FMV) creates a 20% penalty tax plus interest for the option holders — which is a terrible outcome for the employees you're trying to attract. Using the seed investor price is not a safe harbor — the FMV of common stock is almost always lower than preferred stock because of the liquidation preference and other preferential rights. A proper 409A valuation for an early-stage startup typically values common stock at 25-35% of the preferred price. For a pre-revenue startup, the cost is on the lower end ($3-5K through providers like Carta, Pulley, or AngelList). It's a necessary expense. The valuation is good for 12 months (or until a material event like a new funding round), so one valuation covers your initial option grants. Don't skip this — 409A penalties are severe and fall on your employees, not the company.