How to choose a 409A valuation provider

What the regulation actually presumes

For stock that is not readily tradable on an established securities market, Treas. Reg. 1.409A-1(b)(5)(iv)(B)(2) sets out methods of valuation that are presumed to result in a reasonable valuation, and the presumption can be rebutted by the Commissioner only "upon a showing that either the valuation method or the application of such method was grossly unreasonable". The first of those methods is "a valuation of a class of stock determined by an independent appraisal that meets the requirements of section 401(a)(28)(C) and the regulations as of a date that is no more than 12 months before the relevant transaction to which the valuation is applied" (eCFR, 26 CFR 1.409A-1, read 15 August 2026).

Five questions that follow from it

Is the appraisal independent, and who signs it?

The safe harbor route most startups rely on is the independent appraisal. Ask which named individual signs the report and what credentials they hold. Kruze states its valuation partners hold ASA or ABV credentials; Eqvista states NACVA certified analysts; Redwood names partners with CPA, CFA and CVA. Eton argues in its own published guidance that cap table platforms which automate the process do not sign their reports, which is a self-interested point and also a specific, checkable one: ask, and look at the signature block on the sample report.

Will the report still be inside 12 months when we grant?

The presumption applies to an appraisal dated no more than 12 months before the transaction it is applied to. A slow provider is not merely annoying: if the valuation date drifts and grants sit unpriced, you are outside the window you were paying for. Published turnarounds here run from 48 hours to a draft in 3 to 4 weeks.

What happens after a material event?

The same regulation says a previously calculated value is unreasonable as of a later date if it fails to reflect information available after that calculation which may materially affect value. A priced round is the obvious case. Providers that sell refreshes inside a subscription (Eqvista's unlimited year, 409A.io's updates on request) price this differently from firms that quote per engagement.

Who talks to the auditor?

Every provider says audit ready. The distinguishing question is who answers the auditor's questions. 409A.io states it fields auditor questions directly; Pulley states free lifetime audit review support; Redwood states it will connect with you and your auditor at any point; MELD sells auditor coordination as a differentiator.

Can we see a sample report before we buy?

Sharp 409A and Eton both publish downloadable sample reports. Read one. A 409A report is a document your auditor and possibly a future acquirer's diligence team will read line by line, and thirty minutes with a sample tells you more than any comparison table, including this one.

The one thing that does not matter

The fee. Nothing in section 409A or its regulations turns on what you paid. A current, complete, properly performed appraisal at $990 is worth more than a stale one at $10,000. The reason to spend more is complexity: multiple preferred classes, SAFEs and convertibles, secondary transactions, tender offers, or an approaching liquidity event, all of which move the work from a template to an allocation problem. Several providers here say exactly that about their own pricing: Eton states it prices on cap table complexity and turnaround only, and Eqvista states its stage-based tiers may vary with revenue, stakeholder count and capital structure.

If you are doing it yourself

There is a third safe harbor route for illiquid stock of a start-up corporation: a valuation made reasonably and in good faith, evidenced by a written report, but only where it is performed by someone the company reasonably determines is qualified, which the regulation describes as generally at least five years of relevant experience in business valuation or appraisal, financial accounting, investment banking, private equity, secured lending or comparable experience. It does not apply if a change in control is reasonably anticipated within 90 days or a public offering within 180 days. Most companies find that the qualified-person test is the reason they hire someone.

This is general information about a US federal tax rule, not tax or legal advice, and it does not address state law. Talk to your counsel and your accountant before relying on any of it.