The par value of a share is the stated or face value of a share. This value appears on the corporation’s stock certificates, in the organizational documents, and in the certificate of incorporation at the formation stage. The shareholders must contribute, at a minimum, the face (or par) value of the stock in order to fund the company. If the shareholders fail to fund the company with par value, they would be liable for the difference between the actual issue price and the face value. Some states, like California, allow no par value shares.

Most early stage startups issue stock at a nominal par value of about $.00001. In other words, if a founder purchases 5,000,000 shares of common stock at a par value of $.00001 per share, that founder would pay $50 to the company. This payment can be made by check, payable to the company, and deposited in the company’s bank account.

You should also be aware of any tax implications surrounding the issuance of stock in a company. For instance, if your shares are subject to vesting, you may want to make an IRS Section 83(b) election. For more information, read What is an 83(b) Election? 

If you have any doubts or questions about setting the par value of stock for your company or any tax matters, you should speak with a startup lawyer or tax advisor.

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