[scurvy]

There's not much difference between an American style public equity option and private equity option. Both can be exercised at any time. Perhaps you're thinking of European style options, that can only be exercised on a fixed date (expiry).

While neither are great, binomial is better for American style options than BS.

[huac]

American options still have fixed expiration dates, and cannot be exercised after that. While that's closer to a startup's option structure, it still doesn't account for the uncertainty in when or if the startup will go public. Additionally, you never exercise dividend-less American options early, and startups generally don't offer dividends.

I guess you could choose an arbitrarily distant expiration date, but my bigger point was that while BS is clearly not going to give perfect results, the results are reasonable enough and transparent enough to justify their use for tax purposes in lieu of actual market prices.