This article will cover a few frequently asked questions about 409As. If you're looking for a step-by-step guide to the process in Shoobx, see here.
Do I Need A 409A To Grant Shares Or Options? Who Needs To Approve This?
Option grants (and shares) issued under a Stock Incentive Plan must be approved by your company's Board of Directors. To do so, the Board must establish the Fair Market Value (FMV) of the shares to set an exercise price, which is the price the option holder will pay when they purchase (or “exercise”) their stock. The FMV set by the board of directors is generally determined by using one of two methods:
- The Board approves a resolution (typically drafted by the company’s lawyer) that lists all the factors the Board considered in establishing FMV and then another resolution to set the per share price; OR
- The company pays for a valuation expert to prepare a detailed 409A Valuation Report, and the Board adopts the FMV established in the report.
Who Prepares The 409A Report?
Shoobx partners with 3rd party 409A Valuation Report providers based on each company's individual needs.
How Long Does This Process Take?
Getting a 409A takes approximately 2 weeks. However, this is contingent on your company responding to requests for support materials and answers to outstanding questions in a timely manner. You’ll want to leave yourself some time to answer questions as they come in.
Your 409A provider may have questions and/or request additional documentation. Be prepared—your prompt response will keep the process moving!
What Does The 409A Process Look Like In Shoobx?
- Request a 409A Valuation Report and pay the associated fee.
- Answer the survey questions and provide documents (be prepared by glancing at our 409A Step By Step Guide).
- Shoobx sends survey answers and the documents to the 409A Valuation Report provider.
- Provider reviews the survey answers and documents. If needed, the provider will contact you directly to request more information and/or documentation.
- Shoobx will email you when the draft of the valuation report is ready for your review.
- Return to the workflow to review and accept the draft of the valuation report.
- Shoobx will email you when the final draft is in your account.
- Shoobx will generate a board resolution to accept the FMV as defined in the 409A Valuation Report.
Do I Need to Pay for the 409A Valuation? Or Is It Included in My Subscription?
Our Professional and Enterprise subscription plans include one free 409A valuation per year.
In the following cases, an annual 409A valuation is not included in your subscription:
- You are using our Starter Plan for companies with fewer than 15 securityholders on the cap table or less than $1 million raised, or
- Your company is paying your Shoobx subscription fee on a monthly basis, or
- You received a discount or your subscription fee was waived as part of our underrepresented founders program or a relationship with one of our partners.
If your subscription does not include a 409A valuation, the pricing for the report will be as follows:
- Up to two classes of stock - $1,229
- Three classes of stock - $1,899
- Four or more classes of stock - $3,199