TEXAS BUSINESS LAW
Par Value of Stock: What It Means for Texas Corporations
Par value is the nominal, or face, value assigned to a share of stock in a corporation’s formation documents. It is not what the share is worth, not what investors pay, and not what the company is valued at — it’s a legal floor: in Texas, shares with par value cannot be issued for consideration worth less than that par value (Tex. Bus. Orgs. Code § 21.161). Because the floor is the only thing par value still does, most founders set it as low as possible — $0.01, $0.001, or $0.0001 per share — or skip it entirely, since Texas also permits shares “without par value.” The one place the number can genuinely cost you money is Delaware, where par value and authorized shares feed directly into the annual franchise tax.
This article explains where par value came from, how it differs from market and book value, what Texas law actually requires, and what to put in your certificate of formation.
What Par Value Is
Par value is a fixed dollar amount per share stated in the certificate of formation, historically meant to protect creditors. In the nineteenth and early twentieth centuries, par value was meaningful: it represented the minimum capital shareholders had to contribute, creating a cushion creditors could count on. That regime produced the “watered stock” problem — shares issued for property or services worth less than the stated par, leaving shareholders exposed to liability for the shortfall.
Modern corporate law gutted most of that system. Shares today are routinely sold for far more than par, legal-capital rules have been relaxed nearly everywhere, and the protective function has migrated to fraudulent-transfer law, distribution restrictions, and contract covenants. What survives in Texas is the residue: par is a minimum issuance price (§ 21.161), and once the consideration determined for the shares is fully paid, the shares are “fully paid and nonassessable” (§ 21.157) — meaning the shareholder can’t be assessed for more.
Par Value vs. Market Value vs. Book Value
These three numbers measure different things and almost never match.
| Measure | What it is | Who sets it | Typical relationship |
|---|---|---|---|
| Par value | Nominal value stated in the certificate of formation; minimum issuance price | The founders, at formation (amendable later) | Tiny — often $0.0001 or none |
| Market value | What a buyer will actually pay for the share | The market / negotiation | Usually far above par |
| Book value | Assets minus liabilities per the balance sheet, divided by shares | Accounting records | Varies; unrelated to par |
A startup might have $0.0001 par stock, a $0.50 book value per share, and a $5.00 price in its latest financing round. Only the $0.0001 appears in the certificate of formation.
Texas Rules on Par Value
Texas lets a for-profit corporation issue shares with par value, without par value, or both (in different classes). The key Business Organizations Code provisions:
| Provision | What it requires |
|---|---|
| § 3.007 | The certificate of formation must state the par value of each class or series of shares — or state that the shares are without par value |
| § 21.159 | Shares (par or no-par) may be issued for cash, promissory notes, services performed or contracted, securities, or any other tangible or intangible benefit or property |
| § 21.160 | The board of directors determines the consideration for shares (shareholders can reserve that right for no-par shares in the certificate) |
| § 21.161 | Consideration for par-value shares may not be less than the par value |
| § 21.157 | Shares may not be issued until the consideration has been paid or delivered; once it is, they are fully paid and nonassessable |
A drafting note from the Secretary of State’s own Form 201 instructions: don’t write “$0 par value” if you mean no-par. Zero isn’t a par value — state a real number or state that the shares are without par value.
Note for LLC owners: par value is a corporate-stock concept. Texas LLC membership interests don’t carry par value, so if you operate an LLC (or are weighing one — see what a series LLC is), this is one formality you can ignore.
Why Founders Choose Low Par or No Par
Since par value is only a price floor, a high number creates risk with no benefit: early shares issued to founders for nominal amounts could violate the minimum-consideration rule, and amending the certificate later is paperwork you don’t need. A trivial par value ($0.0001) or no-par shares avoids the problem entirely.
Delaware is the special case. Delaware’s corporate franchise tax can be computed two ways — the authorized shares method (based purely on share count, minimum $175) and the assumed par value capital method (based on gross assets, issued shares, and par value, minimum $400) — and the corporation pays whichever is lower, up to a $200,000 cap. A startup that authorizes 10 million shares would owe a five-figure bill under the authorized shares method, but with a tiny par value the assumed par value capital method typically brings an early-stage company’s tax down to a few hundred dollars. That’s why the standard Delaware startup setup is 10,000,000 authorized shares at $0.00001–$0.0001 par. No-par shares are usually a mistake in Delaware, because they forfeit the cheaper calculation method.
Texas has no equivalent. The Texas franchise tax is calculated on a taxable entity’s margin (derived from revenue), not on authorized shares or par value — and entities at or below the no-tax-due threshold ($2.65 million in annualized revenue for 2026 reports) owe nothing, though they still file an information report. In Texas, your par value decision has no tax consequence at all, which is one of several cost differences to weigh when deciding whether to form your startup in Texas or Delaware.
What to Put in Your Certificate of Formation
Practical guidance for a typical Texas for-profit corporation:
- State a nominal par value (such as $0.01 or $0.0001) or no-par — both work in Texas. A nominal par value keeps your options clean if you later convert to or merge into a Delaware entity, where par matters.
- Don’t inflate par to look substantial. Par value signals nothing to investors, and a high figure only raises the minimum you must charge for every share.
- Authorize enough shares to cover founders, an option pool, and early investors without an early amendment — in Texas, extra authorized shares cost nothing.
- Paper the consideration. Have the board determine and document the consideration for every issuance (§ 21.160), and collect it before issuing (§ 21.157). That’s what makes the shares fully paid and nonassessable.
- Issue above par, always. Anything received above par is simply additional paid-in capital on the books; issuing below par is what the statute forbids.
Frequently Asked Questions
Is par value the price investors pay for stock?
No. Par value is only the minimum lawful issuance price. Investors pay whatever the company and investor negotiate, which is almost always far above par.
Can a Texas corporation issue shares below par value?
No. Under Tex. Bus. Orgs. Code § 21.161, the consideration for par-value shares may not be less than par. If you need to issue cheaply, set a lower par value or use no-par shares.
Does par value affect my Texas franchise tax?
No. Texas franchise tax is margin-based and ignores authorized shares and par value. Delaware’s franchise tax, by contrast, is directly affected by both.
Should I choose par or no-par shares?
For most Texas corporations, either is fine; a nominal par value like $0.0001 is the common default and travels better if you ever redomesticate to Delaware, where a low par value unlocks the cheaper franchise-tax method.
Setting up a corporation involves a dozen small decisions like this one, and a few of them are expensive to get wrong. Reidel Law Firm forms and advises Texas corporations and LLCs on transparent flat fees — talk to a Texas business attorney before you file.
