Par value is the minimum price a business assigns to a single share of stock in its Certificate of incorporation, and that figure is locked in the moment the business files. Many startups set par value low, often US$0.00001 or US$0.0001 per share, which is why the number on your formation paperwork might not line up with what your business is worth. That gap can confuse first-time founders, so it’s important to understand why it exists.

Below, we’ll discuss what par value means on your incorporation paperwork, why startups set it so low, how it affects your cap table accounting, and the mistakes founders often make around it.

Key takeaways

• Par value is a legal figure set at incorporation. It has no relationship to what a business is worth or what investors are willing to pay for its shares.

• Startups keep par value extremely low to avoid legal issues with pricing shares below that floor and to reduce franchise tax costs in states such as Delaware.

• Par value shapes a business’s accounting through stated capital and additional paid-in capital (APIC), but it doesn’t affect ownership percentages or dilution on the cap table.

What is par value of stock?

Par value is the minimum price a corporation can put on a single share of its stock. Many US states require certificates of incorporation to state this figure, and once it’s set, the business can’t legally issue shares for less than that amount. It’s largely a legal formality and not a reflection of a business’s value.

Any amount a shareholder pays past that floor gets classified as paid-in capital. For example, if a business sets par value at US$0.0001 and sells a share for US$1, then the US$0.0001 portion counts as stated capital. The remaining US$0.9999 becomes APIC.

Both numbers land on the balance sheet, but they’re not interchangeable:

• Stated capital: The legal minimum tied directly to par value, fixed and small regardless of what investors pay

• APIC: The real capital raised above that minimum, which grows every time the business sells shares at a significant price

Why do startups assign nominal par values?

Many startups set par value as low as their state allows. More than two-thirds of Fortune 500 companies are incorporated in Delaware, so Delaware’s rules show up often in practice. But the same logic applies wherever a state assigns par value a legal function.

Setting the par value as low as possible can help with:

• Avoiding issuance below par: Corporate law in states such as Delaware bars selling shares for less than par value. Set that number too high, and a future down round or a low-priced grant could dip below it. A par value measured in fractions of a cent greatly minimizes that risk.

• Reducing franchise tax: Delaware offers two ways to calculate franchise tax, and a business can use whichever produces the smaller bill. The Authorized Shares Method taxes only on share count. The Assumed Par Value Capital Method factors in par value alongside total assets and shares issued. Keeping par value low sets a lower floor for the assumed par value used in that calculation, which reduces the resulting tax. Other states calculate franchise or formation fees differently.

How does par value work at incorporation?

Par value gets locked in the moment a business files its Certificate of incorporation with the state. That document states two things together: the number of authorized shares and the par value assigned to them. Authorized shares are the total a business is allowed to issue, not the number anyone holds.

When founders receive their initial shares, they pay at least par value for each one. Because that number is set so low, the payment is often a token amount, sometimes just a few dollars total for millions of shares.

Stripe Atlas handles the incorporation filing and generates a Certificate of incorporation with par value and authorized shares already specified.

That step covers the state filing, but founders will still need to:

• Complete the stock purchase (pay for their shares at or above par value and document that payment)

• File an 83(b) election with the IRS within 30 days of the stock purchase to lock in favorable tax treatment as their shares vest

How does par value affect your cap table?

A cap table tracks the distribution of ownership in a business. The accounting underneath it splits ownership into categories.

Here's how par value affects what shows up on the cap table:

• Stated capital: This is par value multiplied by the number of shares issued. It's a small, fixed figure that rarely moves unless the business issues new shares or amends its certificate of incorporation.

• APIC: This is everything investors and founders pay above par value. As a business raises priced rounds, APIC grows substantially while stated capital stays flat because par value doesn't change even as share prices climb.

On the balance sheet, stated capital usually shows up labelled as "common stock" at par value, while the excess sits separately as APIC. Together, the two make up the equity section that accountants reconcile against the cap table.

Where par value matters is in due diligence and audits, where investors and accountants want stated capital and APIC to reconcile cleanly against the cap table's share counts. A mismatch there usually points to a bookkeeping error, such as a share issuance that didn't get recorded at the right price. Cap table software often handles this reconciliation automatically once par value is entered correctly.

What are common mistakes that founders make with par value?

Many par value mistakes happen because founders treat it as a minor formality.

Some common mistakes founders make include:

• Not paying for founder shares: Par value sets a legal floor, but founders still need to pay it and document that payment.

• Missing the 83(b) election deadline: Founders have 30 days from the stock purchase to file this election with the IRS. Missing that window means owing tax on the increasing value of shares as they vest instead of locking in the lower value at purchase.

• Assuming par value reflects business worth: A low par value doesn’t mean a business is worth less.

• Letting stated capital and APIC get out of sync with the cap table: This might trace back to a share issuance that never got recorded at the right price.

• Setting par value too high at incorporation: A business that chooses a par value close to its expected share price risks a future down round or low-priced grant falling below that floor.

How Stripe Atlas can help

Stripe Atlas handles everything you need to legally launch your company—incorporation, employer identification number (EIN), equity setup, and tax filings—so you can fundraise, open a bank account, and start accepting payments in as little as two business days, from anywhere in the world.

Join 100,000+ startups incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

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Banking and payments before your EIN arrives

Atlas files your EIN application automatically after incorporation. You don't have to wait—Atlas enables pre-EIN payments and banking so you can start accepting payments and making transactions right away. US founders with a Social Security number (SSN) are typically eligible for expedited IRS processing.

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Atlas files your 83(b) election for you—US and non-US founders alike—with U.S. Postal Service certified mail and tracking to reduce personal income taxes. You'll get a signed 83(b) election and proof of filing directly in your Stripe Dashboard, with certified mail confirmation.

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