Redesigned 409A Acceptance Flow


What’s new?

We have redesigned the way you review and accept your 409A valuation on Carta. This new design presents you first with a quick summary of the analysis along with a note from your analyst letting you know the next steps in finalizing your fair market value (FMV). Once you have reviewed the report, if you have any questions you can contact our team of valuation experts through the support module in the valuation review portal. Lastly, receive board approval from within or outside of Carta to finalize the current FMV on your account. 

How it Works

Once you receive an email notifying you that your valuation is ready for review, you can follow the link within that email to access the 409A ledger where you are able to review and download your valuation. Alternatively, you can navigate to the page within Carta at Compliance > 409A Valuation.




Review your valuation

From the 409A Ledger, once you select ‘Review 409A report’ you will be directed to the valuation review portal. Here you will find an overview of the analysis performed and the concluded FMV along with a note from your valuation analyst informing you of next steps and noting any details within the report that warrant extra attention. Once you have reviewed the analyst’s note and valuation summary, you can download the full report or access the support module from the valuation review portal to access support articles or get in touch with our team of valuation experts. 


Get board approval

Now that you have reviewed the valuation, the next step is to send it to your board for review. You can do so using the board consent feature within your Carta account to easily track acceptance from each board member within the Carta platform. Once all board members have submitted their board approval through the platform, your valuation will automatically be accepted on Carta. If you got approval outside of Carta, that’s great too, simply select ‘My board has approved’ to accept the valuation to finalize the current FMV in your account. Once finalized, the new FMV will be visible to your option holders on Carta.




409A Ledger Redesign

What’s new?

We have redesigned the 409A Ledger Page where you come to request and review the 409A Valuations of your company and enter the Fair Market Value (FMV) of your company’s options. The goal of this refresh is to help you navigate the valuation process with ease and access resources quickly whenever you need assistance. 

With this updated design you will quickly and easily identify where you are in the valuation process and what to expect next. Carta is here to help you along the way with curated support articles and a variety of options to get in touch with us if you have questions not covered within the articles.

How it Works

Under Compliance > 409A you will find a number of new features designed to help you navigate the Carta Valuation process with confidence.

Valuation Status Tracker

The Valuation Status Tracker at the top of the page clearly indicates where your company is in the valuation request process. Whether you are in the middle of completing your request, if your draft is ready for review or if you are anywhere in between, the tracker will let you know what your next step is as soon as you land on the 409A Ledger page. Also included are tools and support articles to help answer common questions that you may have based on where you are in the valuation process.



Review and accept your valuation

Once you have received your valuation, you can download it for review directly from the Valuation Tracker on the 409A Ledger page. After you have had a chance to review the report and are ready to accept, you will be directed to the final step in The Valuation Tracker, the acceptance workflow. 



Get in touch with our team

Have a question? Navigate to our Support Module on the page and select the contact method that works best for you, our team of experts will follow up with a response typically within 1 business day.



Viewing your 409A Valuations

Now that you have completed the valuation process, your most recent valuation will be displayed at the top of the table at the bottom of the page along with any previous valuations saved to your Carta account. If you have any questions for our Valuation team in between valuations, simply navigate to the new 409A Ledger Page to access our Support model to get in touch with our team of Valuation Experts.




Notifications for Qualified Small Businesses

What’s New

Users with holdings in companies identified as Qualified Small Businesses (QSB) will now be notified of the potential tax benefit. Carta determines QSB eligibility when performing a 409A valuation and email notifications will be sent to all users associated with the company once the valuation is accepted. In addition, vesting emails will include information about the qualified small business stock (QSBS) tax benefit.

Furthermore, users can now find a banner in the company overview page within their portfolio that informs them about QSBS eligibility, linking to a blog post to learn more. Finally, users will be notified if their exercise qualifies for QSBS once they submit an exercise request.

Who this affects

US Companies using Carta for 409A valuations that are QSBS eligible and all their stakeholders, prioritizing “Vested” option holders. 

How it works

Email notifications

Emails are sent to all users associated with a company that qualifies as a QSB. If Carta determines the company is a qualified small business, emails are sent once the 409A valuation is accepted. Extra emails are sent to all users each time the company’s valuation includes eligibility. 

Vesting emails

Vesting emails will now include information about QSBS eligibility to help make a more informed decision about exercising. 

Company’s overview page

A banner informing users of the QSBS Eligibility Tax Benefit can be found next to the company’s name in their portfolio. This banner appears for companies identified as qualified small businesses, including information about the potential tax benefit from exercising and the expected timeframe of the company’s eligibility. 

Exercise submission message

Upon submitting an exercise request, the Congratulations page will inform users that the shares are QSBS-eligible. It summarizes the conditions and links to an Equity Education article to learn more (highlighted in red).

Timing

  • General availability for all 409A customers by the end of Q1

Additional Resources

Qualified Small Business Stock (QSBS)

What’s new

Companies using Carta for 409A will now be additionally assessed for qualified small business eligibility at no extra cost to the company.

Certificates issued by a qualified small business as determined by Carta will have a "QSBS" tag in the product to indicate that the shares represent Qualified Small Business Stock (QSBS). The goal of these tags is help stakeholders make more informed selling decisions.

The IRC’s definition of a qualified small business is restrictive yet vague and open for interpretation at the edges, so potential holders of QSBS should consult their tax advisor before making decisions to sell and claiming the QSBS tax benefit.

How it works

Based on company-provided information during the valuations process, Carta will assess the following criteria for qualified small business eligibility:

  • Company's gross assets are $50M USD or less
  • Company is an active business
  • Company is a C-corp
  • Company does not operate in excluded industries

If a company is identified as a qualified small business, a new badge will appear in the 409A dashboard:

If a stakeholder receives a certificate from a qualified small business but hasn't yet met the 5 year holding period for QSBS, they'll see a "QSBS eligible" tag in their portfolio:

Drilling into the security, the stakeholder will see some additional information about the QSBS status of the certificate:

Stakeholders who have held shares issued by a qualified small business for 5 years will see a "QSBS" tag in their portfolio instead:

Additional Resources

For detailed information about QSBS in Carta, please refer to our QSBS support article.

Who this affects

Companies using Carta for 409A and their stakeholders.

Timing

  • Available now to 50 randomly selected 409A customers
  • General availability for all 409A customers coming in two weeks

Material event making your 409a stale?

What’s coming: Let your employees know your 409a is out of date and their taxes may be impacted if exercising.

Who this affects: 

  • Users: Equity administrators and option holders
  • Packages: Starter, Growth, Scale, and IPO-Ready will receive this functionality.  Any customer with 409a in their subscription.

What’s better: 

Proactive, in-app communication: When enabling this functionality, all option holders, upon exercising, are shown a disclaimer that the FMV is stale and this could impact their taxes. See the full disclaimer below in “Option Holder view”.

Equity Administrator view:

Option Holder view:

Timing: Rolling out to all 409a customers on September 30th.

Announcing (new and improved) Release Notes

Over the last few months, we’ve been listening to your feedback on our changelog and identified usability and customization as two areas for improvement. Today, we are announcing our new and improved Release Notes in order to provide you with up-to-date information and news on Carta product changes. 


Key features of our Release Notes include:

Filter by label

You can now filter out notes to only include the ones you care about most. You will be able to filter by Carta product area (Corporations, Investor Services, Platform, and CartaX), customer type (Employee, Equity Administrator, Board Member, etc. ), or release stage (General Audience, Preview, etc.)

You can filter by label on the right hand side of the screen by selecting the label you’d like to see notes on.




Subscribe for recurring product updates

Curious to know about all the great things we’re releasing on a regular basis? Subscribe to our Release Notes. You will get an email to your inbox whenever we post a new update. You can find the subscribe button at the top of the Release Notes page.



PWERM Valuations, In-app

We’ve released a new feature that helps our staff value late stage private companies. The feature allows staff to conduct a “PWERM” valuation in-app, eliminating the need for them to rely on excel spreadsheets and saving them time on your 409A or ASC 820 valuation.

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PWERM stands for Probability Weighted Expected Return Method. This methodology is often relied upon in the valuation community when there is a possibility of several future outcomes for the Company being valued. For example, Airbnb has said its resuming plans to IPO. However, real world events could come up, such as a global pandemic, that could stall these plans. Due to this uncertainty, a PWERM valuation methodology could better simulate real world outcomes where companies could either continue business as usual or could reach an exit event.