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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.
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.