What does my 409A valuation mean for option strike prices?
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.