What is Fair Market Value?
Fair Market Value
Fair Market Value (FMV) is the price that a share of common stock would sell for on the open market, as determined by an independent valuation.
Why It Matters for Startups
Directly dictates the cap table and dilution structure during fundraising; understanding Fair Market Value helps founders model equity distributions when structuring rounds for stock options pricing and tax compliance.
Detailed Deep Dive
Fair Market Value (FMV) is the price that a share of common stock would sell for on the open market, as determined by an independent valuation.
Frequently Asked Questions
Q:How is FMV determined for private startups?
Via an independent 409A valuation audit conducted annually or after major fundraising events.
Q:Why is FMV important?
It establishes the tax basis for stock option grants, preventing penalties from tax authorities.
Quick Facts
- CategoryFunding
- Key ApplicationStock options pricing and tax compliance
Coverage Trend12 Weeks
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