by Loella Haskew, CPA
My partner and I are starting an "S" Corp. We need to state how much stock each of us holds and what is its par value. How do we compute this?
Forming a corporation is a legal function. You should consult an attorney to make sure that all the filing requirements are met. Alternately you can buy a book about incorporation from a publisher like Nolo Press. You may also inquire about the requirements of incorporation at the California Secretary of State website (www.ss.ca.gov).
An attorney has advised me that California has no requirement for the issuance of stock with a stated par value. You, therefore, can report the capitalization of the company at the same value as your basis in the property (including cash) contributed to the corporation.
You should also consult a tax professional as there are many issues involved with the formation and operation of a corporation. You can avoid many costly mistakes by making sure to set things up correctly at formation. Good luck with your business.
Loella Haskew is a Walnut Creek, Calif., CPA with the firm of Buckley Patchen Riemann & Hall. You can reach her at (925) 937-2727.
Have a question for a CPA? Ask it here.
In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
