What is Par Value?
A business corporation must sell shares of stock in order to capitalize the corporation, that is, provide the corporation with its own capital, separate from the money of its owners. This separation provides part of the support for shielding the shareholders from personal liability for the debts and obligations of the corporation. Shares of stock sold by the corporation represent proportionate ownership interests held by shareholders in the corporation. “Par value” is a dollar value assigned to shares of stock which is the minimum amount for which each share may be sold. There is no minimum or maximum value that must be assigned. Shares may also have “no par value,” which means that the Board of Directors will assign a value to the stock below which the shares cannot be issued. There is no minimum number of shares that must be authorized in the articles of incorporation. One or more shares may be authorized. However, the corporation may not sell more shares than it is authorized to iss
Par value is the assigned value of a share of stock. Stock does not have to have a par value and corporations frequently have No Par Stock, stock which has no assigned value. A stock’s par value does not represent the actual value of a share but it is the minimum amount for which a share can be sold. In some states par value can affect fees and taxes.
(back to top) Par value is a term that is still widely used but no longer has much meaning. Par value is not necessarily the amount paid for the stock, and does not necessarily represent the value of the stock at any time. It can best be described as an arbitrary number put in the articles of incorporation and on the stock certificates which signifies that the stock has some value. Nevertheless, most states allow a company to state within the articles of incorporation that its stock has no par value.
