IRC 409a governs all privately-held companies seeking to issue deferred compensation, which includes many types of equity-based compensation (i.e. stock options). The IRC prohibits the issuance of stock options with exercise prices below fair market value that are in-the-money. Tax penalties stemming from non-compliance can be severe, as both state and federal charges may apply; additionally non-compliance can impede institutional financing or potential exit strategies. We have substantial expertise in this area and our work has withstood the toughest scrutiny from top tier-VCs, Big Four accounting firms, and most of the top venture law firms in the industry.
Equity & Incentive Plans
We have successfully guided companies in the formation and valuation of employee equity and incentive plans by assessing the drivers of value in the market. We work with owners and management to implement plans seamlessly, and can assist with any recurring valuation reporting requirements.
Gift & Estate Tax
Cabrillo Advisors provides independent gift and estate tax valuations for owners of operating businesses, real estate, holding companies, and a variety of structured interests within private equity and venture capital firms. We work confidentially with owners, and their advisors, to develop fair market valuations that meet all IRS requirements; our deliverable adheres to the standards promulgated by Revenue Ruling 59-60, and accounts for the appropriate discounts associated with interests that lack marketability and control. We help clients understand how important valuation metrics are in maintaining wealth for future generations, and how they are key drivers in succession planning efforts.
Employee Stock Ownership Plans (ESOP)
Valuations are a central component of Employee Stock Ownership Plans (ESOP) and are required by law, with severe penalties for non-compliance. We are typically engaged by the ESOP trustee as a financial advisor to the trustee related to the value of the company and stock at the formation of the ESOP and ongoing valuations of the company’s stock.