Glossary: Par Value of a Stock

Par Value of a Stock

Par Value of a Stock - Par Value is the nominal dollar amount that a corporation assigns as the stated value or face value of its stock. Or, put another way, it is the lowest price at you can issue (sell) your authorized stock to capitalize your corporation. When you think par value do not think market value. Common stock par value is fairly meaningless except when bought directly from the corporation. Then, from a bookkeeping point of view, the stock purchase price amount that exceeds the stock's par value is called "paid in capital in excess of par value" and it might be used by a state for tax purposes. On the other hand, a corporation calculates dividend payments based on preferred stock par value. The Board of Directors may decide to assign no par value (its stock bears no stated value on it) in which case it must still assign a minimum price per share for each stock issued.

Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.

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