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How to Prepare for a 409A Valuation: The Complete Document Checklist

Preparing thoroughly for a 409A valuation reduces turnaround time, improves accuracy, and reduces the number of back-and-forth requests from your appraiser. The core preparation involves gathering financial statements, a fully diluted cap table, funding round documentation, financial projections, and a company overview — typically a 2–4 hour effort for a well-organised startup.

Published April 20, 2026
3 min read

Key Takeaways

  • Complete preparation before submission reduces 409A turnaround time by 30–50%
  • The cap table must be fully diluted — including all options, warrants, SAFEs, and convertible notes
  • Financial projections are not required but significantly improve DCF accuracy and report quality
  • Missing or incorrect cap table data is the most common cause of delays and errors in 409A reports
  • Organise documents into a shared folder before engaging your appraiser to start the clock
  • Post-409A, prepare board resolutions and option grant agreements in advance to avoid delays

Why Preparation Matters

The single biggest driver of 409A delays is incomplete data submission. Most standard 409A engagements (Pre-Seed through Series A) can complete in 5–7 business days from the moment the appraiser has everything they need. But the same engagement can take 3–4 weeks when documents trickle in piecemeal. Preparing everything in advance not only saves time — it often saves money on rush fees you would otherwise need to pay.

The Complete 409A Preparation Checklist

Financial Documents

  • Profit & Loss statement — trailing 12 months, monthly breakdown
  • Balance sheet — most recent available (within 60 days of valuation date)
  • Cash flow statement — trailing 12 months
  • ARR or MRR schedule — if subscription business, by month for the trailing 12 months
  • Customer revenue breakdown — top 10 customers by revenue (approximate is fine)
  • Financial projections — 3-to-5-year annual model (even high-level is valuable)
  • Historical revenue by quarter — at least 2 years if available

Cap Table and Equity Documents

  • Fully diluted cap table as of the valuation date — Carta export preferred
  • All share classes: common, seed preferred, Series A/B/C preferred (each separately)
  • All outstanding options: granted, exercised, forfeited, expired — with strike prices and vesting schedules
  • All outstanding warrants: holder, shares, exercise price, expiry
  • All convertible instruments: amount outstanding, interest rate, cap, discount, pro-rata rights
  • Size of unissued option pool (authorised but not granted)

Funding Round Documents

  • Most recent term sheet or stock purchase agreement
  • Preferred stock terms: liquidation preference (1× or multiple), participating vs non-participating, anti-dilution type
  • Price per preferred share for each round and post-money valuation
  • Investor rights agreement (information rights, board rights)
  • SAFE or convertible note agreements with all terms

Company Overview

  • Company pitch deck or executive summary (recent, < 6 months old)
  • Business model description: how you make money, who your customers are
  • Market size estimate (your numbers, no need for external research)
  • Top 3–5 competitors and your key differentiators
  • Recent milestones and upcoming planned milestones
  • Team size and key executive hires since last valuation

After the Valuation: What to Prepare Next

A 409A report triggers a workflow. Prepare these in advance so you can issue options quickly once the report is delivered:

  • Board resolution template: Approving the FMV and authorising option grants at or above that price. Your counsel should have a template.
  • Option grant agreements: Individual agreements for each recipient. Carta or similar cap table software generates these automatically.
  • Employee communication: A plain-English explanation of the strike price and what it means for each employee's grant.
  • 409A report filing: Save the report in your corporate records folder — not just email. Include the board resolution referencing it.

Special Situations: What Else to Provide

SituationAdditional Documents Needed
Company has received an acquisition offer or LOILOI terms and offer price (confidential — appraiser bound by NDA)
Recent secondary transaction occurredTerms and price of the secondary sale
Company operates internationallyRevenue breakdown by geography; local subsidiary financials
Material litigation or IP dispute pendingSummary of dispute and estimated exposure
Key man dependency (departure risk)Brief note on management team stability

Educational Content — Not Tax or Legal Advice

The information on this page is provided for general educational purposes only. It does not constitute tax advice, legal advice, or a formal valuation opinion. Every company's situation is different — consult a qualified tax adviser, attorney, or certified valuation analyst before making decisions based on this content.

State law may vary. Individual US states may impose additional income tax, excise tax, or reporting obligations on nonqualified deferred compensation and stock options. California, for example, imposes an additional penalty tax of up to 20% on top of federal penalties. Always review applicable state rules with local counsel.

Primary source: IRC Section 409A and the final Treasury Regulations under T.D. 9321 (IRS Internal Revenue Bulletin 2007-19). For the most current IRS guidance, penalties, and safe harbor requirements, refer to the IRS IRC 409A Overview page directly.

Content last reviewed: August 2026. Tax law changes frequently — readers are encouraged to verify current rules with the IRS or a qualified professional before relying on this content.

409A Valuation Pro is not affiliated with, endorsed by, or sponsored by the Internal Revenue Service or any US government agency. IRS, Internal Revenue Service, and related names are trademarks of the US Department of the Treasury.

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