Does Cake's 409A follow IRS safe harbor requirements?

QUICK Answer

• Yes. Cake's 409A is performed by qualified independent appraisers, which is what IRS safe harbor status requires.
• Safe harbor shifts the burden of proof to the IRS if your valuation is ever challenged.

It's the standard your attorneys and auditors will expect to see before you issue stock options.

• Cake's valuators follow US GAAP standards.

Deep Dive

Yes. Cake's 409A qualifies for IRS safe harbor because it's performed by qualified independent appraisers, exactly what safe harbor status requires.

IRS safe harbor status means the valuation was performed by a qualified independent appraiser using one of the accepted methodologies specified in the IRS regulations. If the IRS challenges the fair market value used for option grants, the burden of proof shifts to the IRS to demonstrate the valuation was unreasonable, rather than to the company to prove it was reasonable. That shift is the practical protection safe harbor provides.

Safe harbor isn't self-declared. It depends on the qualifications of the appraiser and the methodology applied. Working with an unqualified provider, or using an informal estimate, doesn't qualify, no matter how detailed the output looks.

The Cake Way

Real appraisers, real safe harbor protection

Cake's 409A is built to qualify for safe harbor from the start.

• Qualified appraisers who hold CFA, CVA, and CPA designations
• GAAP-compliant reports accepted by Big Four accounting firms
• Valuation report stored alongside your cap table and option grants
• Valuation draft in 3 business days, included with your subscription

Learn more about Cake's 409A Valuation.

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