We draw upon our extensive experience with financings (public and private) and acquisitions and use a variety of widely accepted valuation methods to appropriately assess the value of our clients’ common stock and stock options. Upon completion of the valuation process, Redwood will deliver a certified valuation report that can be used for taxes and audits.

IRC 409A
The IRS recently finalized regulations that impose potentially expensive penalties if exercised stock options were issued below "fair market value." Employers are required to withhold added payroll taxes while employees may face additional taxes for unrealized gains, plus a 20% penalty tax.

Though IRC 409A allows companies to either obtain a professional appraisal, perform an internal valuation meeting certain standards, or utilize an "buy-sell" agreement for all equity, most companies are choosing to use independent, professional appraisal to avoid any conflict of interest.

SFAS 123R
The Financial Accounting Standards Board instituted a similar measure to IRC 409A to update its standard for the accounting of stock options issued as compensation. This rule is known as SFAS 123R. Public companies were required to comply with this provision in 2006 and accountants are strongly recommending that private companies do so as well.

Like IRC 409A, SFAS 123R requires that companies certify the "fair value" of stock options at the time of issuance and maintain updates upon certain key events. "Fair value" is best established by an outside professional appraisal.