By Stephen Fishman, J.D. “Par value,” also called face value or nominal value, is the lowest legal price for which a corporation may sell its shares. It has nothing to do with how much a corporation’s shares are actually worth or are sold for.

Who determines par value of stock?

A par value for a stock is its per-share value assigned by the company that issues it and is often set at a very low amount such as one cent. A no-par stock is issued without any designated minimum value.

Can you sell shares below par value?

However, par value is now usually set at a minimal amount, such as $0.01 per share, since some state laws still require that a company cannot sell shares below the par value; by setting the par value at the lowest possible unit of currency, a company avoids any trouble with future stock sales if its shares begin to …

How does a company change the par value of its stock?

Instead, the most common way that corporations change their par value is with a stock split (or reverse stock split). A stock split is exactly what it sounds like: a division of shares. For instance, imagine your corporation has 25,000 shares of common stock with a par value of $1 each.

How to set par value for a startup company?

While I typically see either $1 or “no par value” common stock when looking at new client startups that have incorporated on their own or via an online service, I typically recommend that a startup corporation’s Common Stock par value be set at $0.00001 and no higher than $0.0001 per share. My recommendation…

What’s the difference between par value and no par value?

If not, they may choose to issue “no-par” stock shares. This “no-par” status means that the company has not assigned a minimum value to its stock. No-par value stocks do not carry the theoretical liabilities of par value issues since there is no baseline value per share.

Can you change par value of stock in Delaware?

The easiest change to make is probably switching from “no par value” to par value shares. This is actually fairly common in Delaware—the state’s Division of Corporations even has tax notes on making this change on their website.