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Par Value

By IncNow | Published October 19, 2013

Par value is the minimum amount a corporation’s stock can be sold for upon initial issuance. On the Certificate of Incorporation, the owners are required to list the par value of the authorized stock. Note: this does not correlate to the market value of the shares. Typically, people want to keep the par value as low as possible for two reasons. Setting a par value above zero sets the “minimum capital” that must be maintained by the company at all times. Should the company issue dividends that take the value of the company below this, then the directors are personally responsible for allowing that dividend to be issued. Secondly, the par is the minimum amount the stock may be sold for, meaning even the founders have to actually pay into the company at least the amount listed on the stock. However, if you need more than 1500 shares in Delaware you will want to keep your par value very low to keep the initial filing fees low. For example, if you have one million shares of stock authorized in Delaware at zero par, the filing fee will be about $25,000. Alternatively, if you attach a low par value to the shares, such as $0.0001, then the filing fee is only $89. You can always amend the par value and the authorized shares later if needed. For most corporations it is wise to “go private before you go public” to save on initial filing fees and annual maintenance fees associated with a large amount of authorized stock.

When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go