Why your shares say $0.0001 and are worth considerably more.

A number that survived its own purpose

Par value is a historical artefact that has outlived the problem it was invented to solve. It originated as a creditor-protection device: if a corporation stated that its shares had a par value, and was required to receive at least that much for them, then creditors could rely on a minimum amount of capital having actually been paid in. The concept has been steadily hollowed out over the last century, and modern practice sets par value so low that the protection is nominal. But the machinery is still in the statutes, so it is still in your charter.

The practical result is a number that looks meaningful and is not. A founder who sees "par value $0.0001" on a stock certificate and concludes their shares are worth a hundredth of a cent has misread the document as thoroughly as someone reading the authorized share count as their ownership denominator. Par value is a legal input. It is not a valuation, it is not related to the 409A fair market value, and it is not what anyone will pay you.

What par value actually does

Delaware section 154 provides that where a corporation issues shares having a par value, the part of the consideration determined to be capital must be at least equal to the aggregate par value of those shares. That is the mechanism in one sentence: par value sets a floor under legal capital. Consideration received above that floor is surplus, and surplus is the pool from which a Delaware corporation may lawfully pay dividends or repurchase its own stock.

So par value has two live functions. It establishes the minimum the company may accept for a share, and it determines the split between capital and surplus. Neither function is something a founder or an employee needs to think about day to day. Both are things a company’s counsel and accountants need to get right, because the second one constrains what the company may lawfully distribute.

Why $0.0001, and not zero

The convention among Delaware startups is a par value of $0.0001 per share. It is chosen to be as close to zero as is useful without being zero, and there are two reasons for that.

The first is the issue-price floor. Because a corporation may not issue par-value stock for less than par, a high par value would make it impossible to issue cheap common stock — which is precisely what a company needs to do when granting early founder shares and setting low option strike prices. A par value of $0.0001 puts the floor somewhere no real transaction will ever reach.

The second reason is the franchise tax, and it is the one that surprises people. Delaware offers two methods for computing the annual franchise tax, and a corporation pays the lesser of the two. One method keys off the number of authorized shares and scales alarmingly with it. The other — the Assumed Par Value Capital Method — takes the company’s gross assets and its issued share count, derives an assumed par value, and applies it to the authorized shares. For a company with many authorized shares and modest assets, the second method is usually dramatically cheaper.

No-par stock, and when you would use it

Delaware section 151(a) permits a corporation to issue shares with par value or without it. Where stock has no par value, section 154 leaves it to the board to determine how much of the consideration received is capital, with the balance treated as surplus. Some jurisdictions and some company types prefer no-par stock precisely because it removes the floor and the aggregate-par arithmetic.

For a venture-track Delaware C-corp, no-par stock is uncommon, and one reason is the franchise tax again: the Assumed Par Value Capital Method depends on a par value being stated, so a no-par company loses access to the calculation that usually produces the smaller bill. The standard advice for this company profile is a very low stated par value rather than none, and that is why $0.0001 is close to universal.