409A Valuations
Section 409A of the United States Tax Code affects companies who offer non-qualified deferred compensation plans including issuing stock options and compensating employees in stock. Compliance with Section 409A requires an objective party to prepare a 409A valuation to determine the value of the stock or exercised stock options to be reported as part of the recipient’s taxable income.
Background
Section 409A was added to the Internal Revenue Code effective January 1, 2005, under The American Jobs Creation Act of 2004. It was enacted partly in response to practices like those of Enron executives, who accelerated payments under their deferred compensation plans to access money before the company went bankrupt. The aim of 409A is to prevent improper deferrals of income for tax benefits.
Merrimack Business Appraisers for Preparation of 409A Valuations
When you need a 409A valuation, it is recommended that you hire an independent, objective business appraiser with proper appraisal certifications. Given the need for a 409A valuation is compliance with Section 409A of the tax code, it is important to make an informed business decision to avoid penalties and issues with the tax authorities.
Many business valuation professionals are not full-time business appraisal experts. They do the work on the side to offset peaks and valleys in their accounting practice. Retain a proven business valuation professional whose business is solely focused on business valuation preparation and has a proven track record. You may find many valuation firms will not prepare 409A valuations. At Merrimack Business Appraisers, we enjoy the work.
Merrimack Business Appraisers has prepared many 409A valuations for our clients over the years. Our proven processes and track record offer our clients peace of mind that the 409A valuation is objective, defensible, and will stand up to scrutiny.
Many leaders in startups and high-growth companies appreciate our services that keep them compliant with tax authorities, giving them the confidence they desire so they can focus on growing their business and incenting and retaining top talent.
Multiple 409A Valuations in a Year
A comprehensive 409A valuation is required for each non-qualified, deferred compensation ‘event’. Events may be a hiring date, a quarterly grant commitment, or company milestone related. Merrimack Business Appraisers is often retained by the company to prepare the 409A valuation per event which can result in multiple valuations being prepared within a year, especially for companies who are on a rapid growth trajectory and the number of shareholders and capital structure of the company if often changing.
When values matter, a well-formed, well-documented, and complete opinion of value that stands up to rigorous scrutiny is essential.
Proven Process
We have developed a proven process comprised of a series of logical steps that make our company valuations defensible. Our reports document what was done, why it was done, how it was done, and the conclusions drawn and why those conclusions are reasonable and credible.
Proven Track Record
While most cases settle outside of court, when Merrimack Business Appraisers’ valuations have been presented in court by Mr. Pereira, the triers of fact have ruled in favor of the opinion of value 100% of the time.
Proven Methodology
We have long embraced and leveraged the Discounted Cash Flow method; a method now being more readily adopted by other industry business valuation thought leaders.
Singular Focus
Business valuation services is what we do, all the time. This is not a side effort to smooth out workload. Business appraisals is our singular focus that leverages our business experience and acumen, our designations and certifications. You’re assured that the company valuation is prepared by the President of Merrimack Business Appraisers. There is no handoff to inexperienced or junior people.
Highest Ethical Standards
We are impartial, objective, a non-advocate and handle all information confidentially.
Current And invested
We are fully apprised of recent court cases, rulings in tax court, shareholder dispute cases, and divorce court rulings, all of which are factored into our strategy and best practices. We also invest in multiple market databases to provide superior, quality valuation research of related market conditions as key considerations in developing business valuation opinions.
409A Valuations
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We’re a Nationally Recognized Valuation Firm
that develops highly-defensible business valuations for small and mid-sized privately held companies, including closely held family businesses. If you need a 409A valuation, contact us.
When Values Matter.
