Startup Lawyer | Par Value for a Startup Company’s Stock
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Par Value for a Startup Company’s Stock

Posted 11 Oct 2008

Par value is the minimum price that a corporation can issue its shares. While I typically see par values of either $1 or “no par value” when looking at new client startups that have incorporated on their own, I typically recommend that a startup corporation’s Common Stock par value be set at $0.0001 to as low as $0.00001.

My recommendation is based on my belief that startups should authorize 10,000,000 shares of common stock upon filing the its charter. The startup will then typically issue about 6,000,000 to 8,000,000 shares to its initial set of founders.

Therefore, if your startup issues 7,000,000 shares with a $0.0001 par value to its initial founders, the minimum the founders would have to collectively pay (with cash or with cash & intellectual property) for those shares is $700.

Update: If you are looking for more information about incorporation, check out my “If I Launched a Startup” article.

63 Comments
  • Jordan
    Posted at 10:20h, 03 November Reply

    This is something that I’m currently looking at. I’m looking to use either incorporate.com, bizfilings.com or legalzoom.com to incorporate my business to help save cost.

    I would like to issue more than 10,000,000 shares but have read that some states charge a fee for having a very large number of shares when incorporating.

  • Ryan Roberts
    Posted at 10:29h, 03 November Reply

    Well, Delaware will take the lower of your authorized shares or “assumed par value” capital when determining your incorporation fee. I would imagine startups would go for the latter when wanting to issue millions of shares (and keeping par value low).

  • Jordan
    Posted at 12:45h, 04 November Reply

    If I'm the founder, would I have to "pay" for the shares that I issue to myself?

  • Jordan
    Posted at 07:45h, 04 November Reply

    If I'm the founder, would I have to "pay" for the shares that I issue to myself?

  • Ryan Roberts
    Posted at 13:20h, 04 November Reply

    You can set the par value low and consideration can usually come in non-cash form (i.e., IP).

  • Ryan Roberts
    Posted at 08:20h, 04 November Reply

    You can set the par value low and consideration can usually come in non-cash form (i.e., IP).

  • John Ross
    Posted at 10:17h, 05 November Reply

    I'm presently the sole owner of my corporation. I ws issued 500 shares valued at $1.00 per share. How do I authorize 50,000 more shares at a par value of .01?

  • 7 Legal Documents for Startups | The Startup Lawyer
    Posted at 21:08h, 05 November Reply

    [...] document (for now), except that you authorize the amount of your corporation’s shares and set par value. Yet the charter is important because it creates the entity that will hold the IP your team is [...]

  • Ryan Roberts
    Posted at 19:43h, 26 January Reply

    Matt – It's to the corporation. The cash or other property is the consideration for the corporation's shares. So if you cut a check, it would be to "XYZ Co." and then likely deposited in the corporation's bank account.

  • Ryan Roberts
    Posted at 14:43h, 26 January Reply

    Matt – It's to the corporation. The cash or other property is the consideration for the corporation's shares. So if you cut a check, it would be to "XYZ Co." and then likely deposited in the corporation's bank account.

  • Matt
    Posted at 18:27h, 26 January Reply

    In reference to what Jordan asked, “pay for the shares that I issue to myself”, to whom does he pay to? Is it to the company’s separate bank account or to the state or both?

  • Dar
    Posted at 09:28h, 01 February Reply

    Does Delaware law allow you to declare $0.00001 as the par value?

  • Dar
    Posted at 04:28h, 01 February Reply

    Does Delaware law allow you to declare $0.00001 as the par value?

  • Leonard
    Posted at 17:01h, 02 February Reply

    I have a friend overseas whose 300 square kilometers of land lies in a large gold field. I am interested in starting a mining company with him. Problem being, neither of us have large capital, so we’re looking at attracting investors. Could we start a company with stocks valued say at $0.25 and try to raise capital by selling them? Can we issue 100,000,000 shares and attempt to sell them?

    How much is it going to cost us to offer 100 million shares?

    Sorry for all the questions, but this is a pretty new topic for me.

    Any suggested readings?

  • Matt
    Posted at 10:51h, 04 February Reply

    In CA, if I authorized anything above 1 million shares I pay the Dept. of Corporations $300. Now what? What is the process involving the declaration or issuing par value for those shares? In other words, what additional paper work do I have to file and where in order to disclose what the par value actually is and eventually pay the company for them?

  • Ryan Roberts
    Posted at 00:55h, 05 February Reply

    @ Dar – Should be able to. Delaware just requires that you give a par value or state that the shares have no par value.

    @ Leonard – You could, but of course be wary of the securities laws. I don’t know what you mean by how much will it cost to sell the shares.

    @ Matt – Not sure. I typically only form Texas and Delaware entities.

  • James Cox
    Posted at 23:08h, 11 February Reply

    I’m in the process of incorporating in Texas, there will be two share holders at this time. Are your recomendations for 2 share holders still 10,000,000 shares at a par value of .01-.00001, How much do the corporate filing fees vary with larger amounts of shares.

  • Ryan Roberts
    Posted at 00:03h, 16 February Reply

    James,

    The number of shareholders doesn't factor into the authorization of shares issue. Corporate filing fees in Texas are $300, regardless of the shares authorized.

  • Ryan Roberts
    Posted at 19:03h, 15 February Reply

    James,

    The number of shareholders doesn't factor into the authorization of shares issue. Corporate filing fees in Texas are $300, regardless of the shares authorized.

  • CW
    Posted at 18:46h, 23 May Reply

    I’m in the beginning stages of starting my own business as an IL corporation and as sole owner/founder. If the stock will be issued at “no par value,” is the suggestion of 10mil shares recommended? Also in researching my company name via the internet I came across another company’s (located in a different state-NJ) website and the ame is similar to the website name I want to use. It contains two of the words that I want my website to have – one being “virtual” and the other “legal.” Because these terms are quite “generic” and/or widely accepted, would I be infringing on any trademarks if I use the website name that also contains the words “virtual” and “legal”?

    Thank you.
    CW

  • Ryan Roberts
    Posted at 16:49h, 26 May Reply

    CW-

    The 10mil shares rec does not have any relationship to par value.

    I’m not too familiar with trademark infringement, but you could start by searching the USPTO to see if they have any registered marks. I would consult an IP attorney.

  • James
    Posted at 07:55h, 20 October Reply

    I have incorportated in NY State with the standard 200 shares no par value and would like to increase the number of authorized shares to 2 million shares. What is the minimum par value which can be set to shares in NY – Do they allow par value as low as $0.00001?

  • James
    Posted at 02:55h, 20 October Reply

    I have incorportated in NY State with the standard 200 shares no par value and would like to increase the number of authorized shares to 2 million shares. What is the minimum par value which can be set to shares in NY – Do they allow par value as low as $0.00001?

  • Ryan Roberts
    Posted at 12:34h, 21 October Reply

    James – I'm not familiar with NY corporations.

  • Ryan Roberts
    Posted at 07:34h, 21 October Reply

    James – I'm not familiar with NY corporations.

  • Carl
    Posted at 17:22h, 21 October Reply

    Why would it not be a good idea to issue my stock at 100,000 shares with no par value? That way whenever I issue stock I can just set the price I want at that time. My company is a one man company with no employees and a max of 5-6 employees over the next 5 years. A small insurance and investing firm. I will not be taking it public and will not be taking on partners.

    Thank you

  • Carl
    Posted at 12:22h, 21 October Reply

    Why would it not be a good idea to issue my stock at 100,000 shares with no par value? That way whenever I issue stock I can just set the price I want at that time. My company is a one man company with no employees and a max of 5-6 employees over the next 5 years. A small insurance and investing firm. I will not be taking it public and will not be taking on partners.

    Thank you

  • Carl
    Posted at 17:23h, 21 October Reply

    sorry for the double post. It is a Texas corp.

  • Carl
    Posted at 12:23h, 21 October Reply

    sorry for the double post. It is a Texas corp.

  • Suhas
    Posted at 05:51h, 01 November Reply

    I am about to incorporate a start-up in Delaware with 2 of my friends. Post incorporation, we are planning to approach investors for funding. I would like to know what is the best way to structure the shares because currently we have agreed on Founder A gets 55%, Founder B gets 25% and Founder C gets 20%. With this pattern can you suggest the best authorized shares to be issued with minimal fees. Thank you.

  • Suhas
    Posted at 00:51h, 01 November Reply

    I am about to incorporate a start-up in Delaware with 2 of my friends. Post incorporation, we are planning to approach investors for funding. I would like to know what is the best way to structure the shares because currently we have agreed on Founder A gets 55%, Founder B gets 25% and Founder C gets 20%. With this pattern can you suggest the best authorized shares to be issued with minimal fees. Thank you.

  • Carlos
    Posted at 01:37h, 30 January Reply

    If it's approximately $300 for a regular incorporation, how much does it cost to incorporate a corporation with 50,000,000 shares? In Delaware?

  • Carlos
    Posted at 20:37h, 29 January Reply

    If it's approximately $300 for a regular incorporation, how much does it cost to incorporate a corporation with 50,000,000 shares? In Delaware?

  • If I Launched A Startup | Social Matchbox
    Posted at 20:49h, 22 March Reply

    [...] Shares in Charter: 10,000,000 Shares (4) Type of Shares: Common Stock (5) Par Value of Common: $0.0001 (6) Initial Founders Issuance: 8,000,000 Shares (7) Founders Equity Split: Depends on the Team, [...]

  • If I Launched a Startup | Bookmarks
    Posted at 04:01h, 31 May Reply

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  • Will
    Posted at 00:49h, 18 August Reply

    I have a TX C-Corp with 10M shares at .10 cents each. Shortly I will be investing $100,000 of my own capital into the organization and issuing myself 10,000 shares. Where do I get the certificates to issue in my name? Is this something I track within the organization or, since it's a private organization, do I have to register the stock sales with any regulating body, i.e. the SoS or SEC? Thanks.

  • Will
    Posted at 19:49h, 17 August Reply

    I have a TX C-Corp with 10M shares at .10 cents each. Shortly I will be investing $100,000 of my own capital into the organization and issuing myself 10,000 shares. Where do I get the certificates to issue in my name? Is this something I track within the organization or, since it's a private organization, do I have to register the stock sales with any regulating body, i.e. the SoS or SEC? Thanks.

  • Ryan Roberts
    Posted at 09:43h, 20 August Reply

    Will -

    I think you can get share certificates at staples, office max, etc. Otherwise, you can try a corporate book company which will typically include blank share certificates in the corporate book package. Also, every stock sale is within SEC regulation, unless there is an exemption from registration.

  • Ryan Roberts
    Posted at 04:43h, 20 August Reply

    Will -

    I think you can get share certificates at staples, office max, etc. Otherwise, you can try a corporate book company which will typically include blank share certificates in the corporate book package. Also, every stock sale is within SEC regulation, unless there is an exemption from registration.

  • rob
    Posted at 10:51h, 25 August Reply

    I am in the process of starting an online business and I have registered for incorporation. I had some mistakes with my first round of programming the site and need to redo it. However, I have spent much of my capital already and have several people interested in assisting with the design and programming for ownership. My question is, can I legally pay people in shares (or back pay with stock options) or do I have to use cash regardless of whether I make them part owners?

    • Anonymous
      Posted at 17:59h, 16 September Reply

      You can pay in shares, options, or cash. Each has their tax ramifications, the first 2 have securities law implications as well.

    • Anonymous
      Posted at 17:59h, 16 September Reply

      You can pay in shares, options, or cash. Each has their tax ramifications, the first 2 have securities law implications as well.

  • rob
    Posted at 05:51h, 25 August Reply

    I am in the process of starting an online business and I have registered for incorporation. I had some mistakes with my first round of programming the site and need to redo it. However, I have spent much of my capital already and have several people interested in assisting with the design and programming for ownership. My question is, can I legally pay people in shares (or back pay with stock options) or do I have to use cash regardless of whether I make them part owners?

  • Terry
    Posted at 04:28h, 28 August Reply

    Ryan, an investor wants to buy “40% of the company’s original issue common stock”. The terms are a good and the investor is a good fit. The question I have is that on my original certificate of incorporation, I authorized 10 million shares and purchased 5 million. I’ve issued another 3 million to my two key business associates.

    That leaves less than the 4 million (40% of 10M) that the investor is requesting. Is it a matter of amending the COI to add the necessary stock? If I increase the authorized amount on the NOI, will that be considered “original issue stock”?

    Thanks in advance.
    Terry

    • Anonymous
      Posted at 17:58h, 16 September Reply

      I would talk to the investor and ask exactly what they are looking for in their investment. Clarity would help — I typically include a pre- and post-investment cap table in any term sheet.

    • Anonymous
      Posted at 17:58h, 16 September Reply

      I would talk to the investor and ask exactly what they are looking for in their investment. Clarity would help — I typically include a pre- and post-investment cap table in any term sheet.

  • Les
    Posted at 10:45h, 01 September Reply

    I have a c corp that issued 200 shares 20+ years ago, I own them all. The corp has been inactive for several years. I would like to use this corp to purchase 2 companies I intend to buy. How do I increase the number of shares to 10,000,000? Thanks

    • Anonymous
      Posted at 17:56h, 16 September Reply

      You would likely amend the charter with the state after obtaining the requisite shareholder/director approvals.

    • Anonymous
      Posted at 17:56h, 16 September Reply

      You would likely amend the charter with the state after obtaining the requisite shareholder/director approvals.

  • jon
    Posted at 09:57h, 19 September Reply

    Is there a minimum par value or can it be as low as $0.0000001 in the state of Delaware?

    • Will
      Posted at 00:27h, 06 October Reply

      I would also love the answer to this question–thanks!

    • Will
      Posted at 00:27h, 06 October Reply

      I would also love the answer to this question–thanks!

  • jon
    Posted at 09:57h, 19 September Reply

    Is there a minimum par value or can it be as low as $0.0000001 in the state of Delaware?

  • Lyrambemis
    Posted at 17:57h, 04 November Reply

    Texas Corp – Can a founder purchase capital stock (common stock) for more than the par value and the excess dollars paid over par value be entered into the corp’s accounting as part of the stockholder’s equity? My goal is to increase the founders stock basis.

  • Lyrambemis
    Posted at 17:57h, 04 November Reply

    Texas Corp – Can a founder purchase capital stock (common stock) for more than the par value and the excess dollars paid over par value be entered into the corp’s accounting as part of the stockholder’s equity? My goal is to increase the founders stock basis.

  • Starlette
    Posted at 20:18h, 15 February Reply

    A corporation was formed in Texas and issued 1200 shares of stock with no par value. The shares were issued to three individuals. However, one of the individuals never paid any money for the stock. Is there a quick and easy way to get the stock back from that individual?

  • Tom
    Posted at 15:33h, 17 March Reply

    My biz partner and I are setting up a new company. When we issue the initial shares with a par value of $0.0001, are we allowed to purchase additional shares at that par value at time of funding to prevent dilution of our shares.

    Better question, how can we prevent our percentage of ownership from dilution?

  • The Checklist Every Entrepreneur Should Read Before Launching a Startup
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  • Marti
    Posted at 14:38h, 10 October Reply

    Ex.
    Sole owner, S-corp, CA
    1,000,000 shares startup.

    do I certify that all 1,000,000 are mine, at a penny or dollar?
    do I have to show anything once I certify 1,000,000 shares are mine?

    should I only do 900,000 or less shares of the 1,000,000 sum, at time of startup? what are the reasons for not issuing all of them since I do not have any Directors, personnel or investors?

    Thank you!

  • B
    Posted at 21:13h, 30 July Reply

    Make sure ya’ll read the post titled “Delaware Freakout” on this blog. I didn’t. I only read this post. And my company that made $0 got a $100k+ corporate tax bill. It can be restated but an amendment costs $194. If you’ve got big dreams with a small bank account don’t make this mistake.

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  • Steps to starting a company in 2014 | Danny Beckett Jr.
    Posted at 20:20h, 03 January Reply

    […] in Certificate of Incorporation: 10,000,000 sharesof Common Stock (5) Par Value of Common Stock: $0.00001 per share (6) Aggregate Stock Issuance to the Initial Founders: 6,000,000 shares (7) Founders Equity […]

  • Parham
    Posted at 20:54h, 26 February Reply

    I’ve been advised to use $0.0001 (basically $1,000 based on 10M shares) by many Silicon Valley law firms.

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