Section 409A of the Internal Revenue Code pertains to nonqualified deferred compensation, and applies to all privately held companies as well as “specified employees” of publicly held companies.
If your company offers stock options as a part of its total compensation package, the IRS may view the options as non-qualified deferred compensation if the strike price of the options is less than the Fair Market Value of the underlying stock on the date of issuance. Failure to meet the standards set forth in Section 409A may result in an additional twenty percent (20%) tax imposed on gross income, in addition to further IRS scrutiny which may result in additional interest charges being levied based on prior instances of such compensation.
That is where CVI’s professionals come in- we advise you independently and objectively as third party appraisers to determine the Fair Market Value of the stock in your company, so that the options offered are fully compliant. We look forward to working with you to ensure that the future success of your business venture avoids suffering unintended financial consequences at the hand of the IRS.