How the IRS Uses 409A Valuations to Protect Employees and Founders?

Sun, 21 Sep 2025 14:42:55 +0000

When startups issue stock options, the potential for rapid wealth creation is significant, but so are the risks associated with incorrect valuation. The Internal Revenue Service (IRS) established Section 409A to regulate non-qualified deferred compensation, including stock options. Its primary role is to ensure that employees and founders are not unfairly penalized due to stock options being priced below their fair market value.