IRS Puts Early Stage Company Valuations in Focus

"Recent tax law changes have put increased focus on private company common stock valuations. This new law, IRC Section 409A, applies to "discounted" stock options (options having an exercise price that is less than the stock's grant date fair market value), and imposes significant penalties on noncomplying awards. This puts private companies under increased pressure to be able to support and defend their valuation determinations. Proposed regulations issued in connection with the new law set forth protective presumptions on which private companies may (and should) rely in making valuation decisions."

The Heller Ehrman Venture Law Group has prepared and assembled these private company valuation materials including a summary of principles useful in valuing early stage companies, that will be helpful to companies as they adjust to these developments.

Thanks to my colleague, James Cummins, for the link.