Friday, May 29, 2009

Update on Costs and Practices for 409A Valuations

"Who's Doing 409A Valuations These Days?" From William Carleton, Esq.

"Industry
practice is currently in flux right now. Generally speaking, early
stage companies that are not venture backed are by and large not hiring
independent valuation firms and instead are determining FMV in other
ways. Venture backed companies, on the other hand, still appear to seek
the extra comfort of an outside appraisal (depending on your point of
view, this reflects an appropriately professional prudence, little
different than insisting a startup purchase D&O insurance; or else
it reflects an aversion to exposure of firm members who would appear to
be qualified, under 409A, as persons “with significant knowledge and
experience” at valuations). As Davis Wright attorney Joe Wallin points
out on his firm’s startup blog, third party appraisals are not
required. At the same time, a formal valuation may be better at
shifting the burden to the IRS to prove that a particular valuation is
not reasonable. Prices for such appraisals, at least from the “cottage
industry” shops and programs, have come down now, within a range of
from $3000 to $7000 (some of these providers will commit to doing
annual updates at a lower rate).

more...http://409adismay.blogspot.com/2009/05/update-on-costs-and-practices-for-409a.html