What does my 409A valuation mean for option strike prices?
In this article
In this article group
- What is a 409A valuation?
- How do I add a 409A valuation to my Cake plan?
- How to start your 409A valuation in Cake
- How do I upload an existing 409A valuation to Cake?
- When do I need a 409A valuation?
- What is 409A safe harbor, and does my valuation qualify?
- How long does a 409A valuation take through Cake?
- What data do I need for my 409A valuation?
- Is a Cake 409A automated, or done by a valuation expert?
Worth exploring
Your 409A is the number you grant at. Every stock option needs a strike price at or above the fair market value in your current valuation.
Grant below it and your employee pays
The consequences of a cheap strike price land on the person you granted to, not on the company. They are taxed on the income as it vests, before there is anything to sell, and a further 20 percent charge applies on top.
A bad conversation to have with someone you granted equity to as a thank you.
Grant at it and nothing happens yet
At or above fair market value, no tax is due at grant. Your employee's tax event moves to exercise or sale, which is where they expect it.
Cake keeps the number current for you
When a valuation is finalised, apply the new fair market value to your option pools. Every grant created from that point prices off it, so you are not typing the number in one grant at a time.
Grants already created keep the value they were issued at. That is the point, since a grant is priced at the fair market value that applied on its grant date.
Go to Equity plans → Stock options to grant against it.