What is par value?
Direct answerPar value is the nominal value assigned to each share of stock in a company's formation documents. It is usually set at a very small amount, such as $0.0001 or $0.001 per share, and it generally has little relationship to what the stock is actually worth.
When a startup is incorporated, its Certificate of Incorporation typically states how many shares the company is authorized to issue and the par value assigned to those shares. The par value is a legal and corporate recordkeeping detail, not the company's valuation or the price investors will eventually pay for its stock.
For founders, the distinction matters because par value is easy to confuse with the actual value of the company or the price of its shares. A startup might have common stock with a par value of $0.0001 while later selling preferred stock to investors for several dollars per share. The two numbers serve completely different purposes.
A small number with a specific purpose
Think of par value as a number assigned to a share when the company is legally formed. It is not an estimate of what the company is worth. It is simply part of the company's corporate structure.
For example, a Delaware corporation might authorize 10 million shares of common stock with a par value of $0.0001 per share. That does not mean the company is worth $1,000, and it does not mean investors will later buy shares for $0.0001.
The company could later raise money from investors at a much higher price per share. If an investor purchases preferred stock for $2 per share, that $2 price reflects the negotiated terms of that financing. The $0.0001 par value remains a separate corporate-law detail.
This is why founders should not treat par value as a valuation. It describes the nominal value assigned to the shares in the company's formation documents, while the actual price of shares in a financing reflects what the company and investors agree those shares are worth in that transaction.
What the SEC says, and what founders are actually asking
Par value is primarily a corporate-law concept rather than an SEC fundraising term. For a Delaware corporation, the company's Certificate of Incorporation identifies the authorized shares and the value assigned to those shares.
Par value is established as part of forming the corporation and documenting its share structure.
That means it generally exists before a startup begins raising money. The company first establishes its authorized shares and par value through its formation documents. Later, when the startup raises money, the financing documents establish the terms of that particular investment.
This distinction helps explain why a company's par value does not tell you what its shares are worth. Par value belongs to the company's legal share structure. The price investors pay in a fundraising round is determined separately.
For founders using a Delaware corporation, par value is therefore something to understand when setting up the company, not something to use as a measure of the startup's valuation.
Founders frequently ask what par value they should choose when incorporating and why the number is usually so small.
In founder discussions, the question often comes down to whether setting a very low par value has anything to do with the company's actual value. The answer is no. Founders generally treat the decision as part of setting up the corporation's share structure rather than as a statement about what the startup is worth.
Founders often encounter par value when incorporating, long before they start thinking about fundraising terms. That makes it easy to assume the number will determine future investment pricing.
It does not. Once fundraising begins, founders need to keep formation records, stock information, investor documents, and fundraising terms organized separately but connected. That distinction becomes especially important as the company moves from incorporation into its first fundraising round.
Par value is a nominal value assigned to shares in a company's formation documents. It is not the company's valuation and it is not the price investors will necessarily pay for the company's stock.
For a startup, the important thing is understanding where par value fits in the larger ownership structure. It is established during incorporation, while actual investment pricing is determined later through the terms of a fundraising transaction.
From formation records to fundraising
Par value is established before a startup begins using Cairnul to manage its fundraising. Once fundraising starts, founders have additional information to organize, including investor records, signed agreements, ownership information, and fundraising milestones.
Cairnul keeps fundraising records connected to the ownership information that follows the company's formation. When a founder begins a SAFE round, the investment records and signed agreements become part of the same fundraising workflow instead of being stored separately across spreadsheets and folders.
This separation also helps founders understand the difference between formation details and fundraising terms. Par value remains part of the company's corporate structure, while investment amounts, valuation caps, discounts, and other financing terms are tracked as part of the fundraising workflow.
Keeping those records connected gives founders a clearer view of how the company moves from incorporation into fundraising without treating par value as a measure of what the startup is worth.
Many founders first encounter par value while incorporating and assume it represents the price of their stock.
It does not.
Par value is assigned to shares as part of the company's corporate structure. The actual price of stock in a financing is determined separately and reflects the terms agreed between the company and its investors.
Another common misconception is that setting a very low par value makes the company cheap. A $0.0001 par value does not mean an investor will later purchase a share for $0.0001. An investor's purchase price is determined by the financing terms, not by the par value stated in the Certificate of Incorporation.
Founders also sometimes assume that par value needs to change as the company's valuation increases. In general, the company's growth in value and the par value of its shares are separate matters.
Understanding that distinction makes the transition from incorporation to fundraising much easier to follow.
Get your share structure organized early
Understand what par value means before incorporating your company.
Review the authorized shares and par value stated in your Certificate of Incorporation.
Separate par value from the actual value or financing price of your stock.
Keep your formation documents available when you begin preparing for fundraising.
Connect your ownership records with the fundraising documents created after incorporation.
Keep formation information, investor records, signed agreements, and fundraising milestones organized in one connected workflow.
Frequently asked questions
No. Par value is a nominal amount assigned to shares in the company's corporate documents. The actual value or purchase price of stock is determined separately.
Startups often use a very low par value because it is a nominal corporate value rather than an estimate of what the company is worth. The appropriate structure also depends on the company's formation documents and applicable corporate law.
No. Par value does not determine the startup's valuation. A company may have shares with a par value of $0.0001 while investors later purchase shares at a much higher price.
For a corporation, par value is generally stated in the company's Certificate of Incorporation alongside information about its authorized shares.
Par value and the price investors pay in a fundraising round are separate concepts. A fundraising round does not automatically mean the company's par value changes.
Yes, but mainly as part of the company's corporate structure and formation records. It should not be confused with valuation, investment pricing, or the economic value of the founder's shares.
Keep your company records connected
Cairnul helps founders organize investors, documents, and compliance in one place, so the whole raise stays clear from first sale to close. Join the waitlist to be among the first founders to run a cleaner, more organized round.
Join the waitlistDisclaimer. This content is provided for educational purposes only and does not constitute legal, tax, or investment advice. Fundraising rules, filing requirements, and fees may vary by jurisdiction and change over time. Always confirm current requirements with qualified counsel or the relevant regulator.