Why is FMV required?
We require current and historical Fair Market Value for the company to ensure that equity awards were issued under the safe harbor laws of the IRS and to prepare tax information for electronic exercises which requires an up-to-date FMV.
Here are the tax and accounting actions that require correct FMV :
- Form 3921 for option holders
- ASC718 - Stock option expensing reports
- ASC505 - Stock option expensing reports for non employees
- 83(b) election letters for early exercise option grants
- AMT Tax for ISO exercises
- NSO tax witholdings for employees
If you don't have a 409A valuation yet, you can use Par Value as "Board determined" FMV and correct values at a later date. This allow exercises without a 409A valuation. Once you have completed onboarding, you can sign up for Carta 409A and work with a valuation analyst for a report, click here to find out more.
To add fair market values for your company, click here.
If your company is currently onboarding , click here to see how to update the FMV in set up guide.