# What is Fair Market Value? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/fair-market-value](https://spidits.com/startup-glossary/fair-market-value)

## Definition
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.

## Architectural Mechanics & 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.

## Industry Applications & Real-World Use Cases
Stock options pricing and tax compliance

## Frequently Asked Questions

### How is FMV determined for private startups?
Via an independent 409A valuation audit conducted annually or after major fundraising events.

### Why is FMV important?
It establishes the tax basis for stock option grants, preventing penalties from tax authorities.

## Related Terminology
- [strike-price](https://spidits.com/startup-glossary/strike-price)
- [409a-valuation](https://spidits.com/startup-glossary/409a-valuation)
- [esop](https://spidits.com/startup-glossary/esop)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*