409A Valuation

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Inkle is a chat-based US CPA product that provides 10x easier, affordable and faster bookkeeping, US state/federal tax filings and compliance filings for cross-border / multi-entity startups. Used by 3% of all YC companies globally, we operate using clean dashboards, deadline alerts, system of record, secure document vault, fast chat replies (with a human) and quick filings at a fraction of the normal cost.

What is 409A valuation?

The 409A valuation deliverable will be a 25+ page report from Inkle with the following contents, and a priced common stock valuation per share. The work will be done by highly qualified US-licensed CPAs based in Bangalore with decades of experience, and will be completely defensible in case of any IRS audit. Our teams are available at short notice in multiple time zones via Inkle Chat, Zoom and Phone. We work entirely through a workflow process in our new SaaS platform, storage and system of record.

Documents required

  1. Company overview presentation
  2. Any recent presentation to the Board of Directors
  3. Forecasted revenue tor the next 12 months
  4. Forecasted costs for the next 12 months
  5. Cash burn for next 12 months
  6. Any other liabilities
  7. Any valuation material
  8. Most recent cap table

How to get started

  1. Create an account on www.inkle.io
  2. Add your entity information on app.inkle.io
  3. Visit “Tasks” and get started with “409A Valuation”
  4. Share the required documents

Please note
For India-based companies with a US holdco

Inkle takes the view that US companies directly employing resident US taxpayers should go for a 409A valuation report before issuing ESOPs - and after other certain events which are widely written about (eg. funding rounds, change of control, etc).

However, for US companies where all the employees are not in the US or US tax residents or US tax payers (eg. they are all India tax residents residing in India and employed by the subsidiary), there is no need for the US holdco to undertake a 409A valuation report. The reason is that the 409A is specifically for the purpose of defending against any US IRS examination of the facts of granting ESOPs to US entity employees only.

There is one possible scenario where you would have to address some issues. If you granted US entity ESOPs to a foreign subsidiary employee, who later becomes a US tax resident. The simplest way to deal with it is to stop that person's vesting when they move to the US, and start a fresh grant.