What is Par Value?

Posted by American Ltd on Sep 8, 2015 8:30:00 AM

stock par value questions and answers incorporate

Corporations such as C-Corps and S-Corps are owned by their shareholders. Shareholders are individuals who purchase stock in a company. A company does not have to be listed on a public stock exchange to sell stock in your company, the stocks can be sold privately to investors large or small. Stock can also be sold to employees as part of an Employee Stock Ownership Program (ESOP). The first step to selling stock is assigning it a par value. 

What is Par Value? 

When issuing stock for a corporation a par value must be assigned per share. Par value is the nominal value of a share of stock as specified by the corporate charter. The stock cannot be sold for less than the set value.This is not to be confused with the selling price or asking price, nor the market vakye the stock is exchanged at. Par value is the minimum price of a share below which the share cannot be issued.

For example, if par value of a stock is $10 and the stock is traded for $5 the company would be liable for the remaining $5. To avoid this companies typically offer no par value or a par value less than $0.01. Assigning higher par values and issuing more stock can also add to your annual tax payments and initial incorporation fees. 

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