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.
What is par value? Par value is the minimum selling price for a share of stock. Stock may be sold at any price equal to or above the par value (whatever the market will bear), but stock may not be sold below the par value. The par value is designated when the corporation is formed but may be amended as the needs of your company changes. Some states allow you to designate a $0/share par value.
Par value is simply an accounting or bookkeeping unit of measure used to keep track of the amounts given to the corporation when stock is issued. Par value means much the same as purchase price. If the stock has a $1000 par value, then the person wishing to purchase the stock must give something with at least a $1000 value for the stock. Amounts given for the stock in excess of par value are called “paid in capital in excess of par value” and again is simply a bookkeeping title. Par value is only meaningful when the stock is bought directly from the corporation and is not considered when stock is bought on the open market. When one buys stock on the market, they pay what the stock is actually worth, the “market” price.
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.
Par value is the minimum selling price for a share of stock. Stock may be sold at any price equal to or above the par value (whatever the market will bear), but stock may not be sold below the par value. The par value is designated when the corporation is formed but may be amended as the needs of your company changes. Some states allow you to designate a $0/share par value.
