How Long is a 409A Valuation Good For? 

A 409A valuation is a necessary fair market valuation (FMV) of a private company’s common stock. It's not just a compliance requirement—it’s a key financial move for startups issuing equity-based compensation. But one critical question founders and CFOs often ask is: How long is a 409A valuation good for? Understanding the validity period of a 409A valuation ensures your stock options remain IRS-compliant and defensible.

What Exactly is a 409A Valuation?

Before we talk about how long a 409A valuation remains valid, it’s essential to revisit what it is and why it matters.

A 409A valuation is an independent appraisal that determines the fair market value of a company’s common stock. This valuation sets the strike price for stock options granted to employees and advisors. Without a reliable 409A valuation, your company could face serious tax consequences if the IRS believes your strike price was set too low.

Private companies typically seek professional 409a valuation services to ensure accuracy, legality, and defensibility.

So, How Long Is a 409A Valuation Good For?

Under standard IRS regulations, a 409A valuation is good for 12 months from the valuation date or until a material event occurs—whichever comes first. This means you can issue stock options at the valuation price for a full year, unless something significant impacts your company’s value.

Key Timeframes to Keep in Mind

• 12 months validity: A valuation report is considered “safe harbor” for up to one year.

• Material change: If a significant event occurs—such as a new funding round, acquisition, change in business model, or major partnership—the valuation may become outdated immediately.

So, while 12 months is the general rule, your real timeline could be much shorter depending on what happens inside (or outside) your business.

What is a Material Event?

A material event is any change that could affect the fair market value of your company. If one of these events occurs, you should seek new 409a valuation services to stay compliant.

Common Material Events

1. Equity financing – A new funding round often changes the company’s perceived value.

2. Significant revenue growth – If your company lands major new contracts or jumps in profitability, FMV shifts.

3. M&A activity – Acquiring or being acquired affects your entire valuation landscape.

4. Product launch or pivot – Releasing a major product or altering business strategy may impact valuation.

5. Executive changes – A new CEO or executive team restructuring might influence investor sentiment or internal value assumptions.

If any of these happen, it's recommended to obtain updated 409a valuation services—even if your previous report is less than a year old.

Why Does the Validity Period Matter?

Issuing stock options using an outdated or invalid 409A valuation can trigger Section 409A penalties, including severe tax consequences for employees and the company. You could be seen as issuing options below fair market value, which violates IRS rules.

Risks of Using an Expired 409A Valuation:

• Immediate income tax on vesting options

• 20% additional federal tax penalty

• Potential interest and penalties

• Loss of IRS safe harbor protection

Using updated and timely 409a valuation services mitigates these risks and protects your team and investors.

Who Needs a 409A Valuation?

Not all companies are required to get a 409A valuation, but most private startups issuing equity do. If your company is incorporated, plans to issue common stock options, or intends to offer equity to new hires, you’ll likely need professional 409a valuation services.

Common Triggers for 409A Valuation:

• Incorporating and issuing the first equity grants

• Preparing for a new funding round

• Revising an employee equity plan

• Hiring new executives or issuing refresh grants

• Considering a potential exit (M&A or IPO)

Benefits of Regular 409A Valuation Services

The advantages of staying up-to-date with your 409A valuations go beyond legal compliance. They help your business maintain financial discipline and attract talent.

• IRS Safe Harbor Protection: Protects your stock option grants from IRS challenges and penalties.

• Investor Confidence: Demonstrates financial discipline and transparency to current and potential investors.

• Accurate Option Pricing: Ensures fair strike prices, supporting recruiting and retention efforts.

• Audit Readiness: Keeps you prepared for due diligence, board reviews, and audits.

• Employee Trust: Shows your team that their equity is managed professionally and compliantly.

How Often Should You Update Your 409A Valuation?

Even though a 409A valuation can last 12 months, many companies opt for more frequent updates—especially those in dynamic growth phases.

• At least annually: Stay safe harbor compliant by refreshing your valuation every 12 months.

• After material events: Re-evaluate if anything major impacts your company’s value.

• Pre- and post-financing: Consider getting a valuation before and after raising funds to reflect accurate FMV.

Proactive companies leverage technology-driven 409a valuation services to stay on top of these timelines without administrative burden.

What Happens If You Skip an Update?

Failing to update your valuation after a material event or at the 12-month mark means you’re no longer within the IRS’s safe harbor guidelines. Any new stock options granted could be considered discounted compensation, creating compliance nightmares.

Consequences of Outdated Valuation:

• Employee tax penalties

• Employer tax withholdings

• Legal scrutiny

• Loss of top talent due to poor equity package credibility

That’s why using reliable 409a valuation services like those from 409.ai is not only smart—it’s essential.

How 409.ai Simplifies the Process?

At 409.ai, we’ve reimagined what 409A valuations should look like. Instead of slow, expensive, and manual processes, we deliver fast, technology-enhanced solutions built for modern startups.

Features of 409.ai’s 409A Valuation Services:

• 2-Day Turnaround: Draft report available within 48 hours.

• 50% More Affordable: Half the price of traditional firms.

• AI-Driven Accuracy: Smart analysis meets human expertise for reliable valuations.

• Seamless Integrations: Connects with QuickBooks, Xero, Carta, NetSuite, and more.

• Expert Review: Each report is reviewed by qualified valuation professionals to ensure it meets IRS requirements.

Whether you’re a first-time founder or seasoned CFO, our efficient and scalable 409a valuation services help you avoid errors and gain peace of mind.

What to Look for in 409A Valuation Services?

Not all services are built the same. When choosing a valuation provider, look for these key attributes.

What Makes a Great 409A Valuation Partner?

• Speed – Can they deliver in days, not weeks?

• Compliance – Are the reports IRS-defensible?

• Experience – Do real valuation experts review your data?

• Cost-effectiveness – Are prices startup-friendly?

• Integrations – Can they connect with your accounting tools?

• Transparency – Do they allow report reviews before final delivery?

409.ai checks all these boxes with a platform engineered for accuracy, compliance, and startup budgets.

How to Know When It’s Time for a New 409A Valuation?

Sometimes, it’s not immediately obvious when your company needs a new valuation. Here are some signs that your current report might be outdated.

Signs You Need a New 409A Valuation

• You’ve raised capital since your last valuation

• Significant change in revenue or burn rate

• You’re planning a stock option refresh or new equity grants

• The board is requesting updated FMV

• Preparing for an audit, exit, or due diligence

Being proactive can save your company from risk. Relying on updated 409a valuation services ensures compliance and strategic clarity.

Why Choose 409.ai?

409.ai offers a smarter, faster, and more cost-effective approach to 409A valuations—backed by technology and supported by expert insight.

Here's why 409.ai is the ideal partner for your 409A valuation services:

• 10x Faster Process: Complete your onboarding in minutes and receive a draft report within 48 hours.

• 50% Cheaper: Our tech-driven platform allows us to cut costs without sacrificing quality.

• No Credit Card Required: Start your valuation risk-free.

• Human Touch + AI Precision: We combine automation with expert review to ensure accuracy and defensibility.

• Real-Time Integrations: Save hours with plug-and-play integrations to major accounting platforms like QuickBooks, Xero, Carta, and more.

• IRS-Defensible Reports: Every valuation is thoroughly reviewed by qualified professionals to ensure compliance with IRS standards.

• No Spam, Just Results: We keep your workflow clean and focused.

When your company’s equity is on the line, trust 409.ai to deliver trusted, fast, and effective 409a valuation services that align with your company’s needs—on your timeline.