409A

409A is the section of the Internal Revenue Code that regulates the tax treatment of “non-qualified deferred compensation.”

In order to avoid extremely adverse tax consequences, startups comply with Section 409A by issuing stock options at least at fair market value.

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Ryan Roberts Startup Lawyer
Ryan Roberts is a startup lawyer with more than two decades of experience advising on venture financings and M&A transactions totaling more than $1 billion. He is the author of the Amazon bestselling startup law book Acceleration.