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Q.What is Common Stock and Par Value?
A.Common stock (shares) is the most typical form shares issued by corporations, and generally carries with it voting rights.
Par value is the lowest value at which the common shares can be sold. Par value has no relationship to either the corporation's market value or its stock price. Par Value merely sets the lowest value for which a corporation may sell its common stock.
Many states, including Delaware, compute the annual franchise tax on the number of authorized shares and their par value. It therefore may be important to limit the number of authorized shares and the par value. Attorneys often recommend that a small business corporation initially start with between 1,500 and 2,500 shares of common stock at either no par value or a par value under $1.00.
Before forming your corporation we strongly suggest you consult with a local corporate attorney and if necessary a tax specialist to see how and if setting a par value can reduce your tax basis.
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