Price Per Share

Price per share is at term that refers to the dollar amount that is assigned to one share of stock in a corporation, particularly when such shares are offered for sale to potential investors. Price per share does not have to be set at any specific amount when a corporation is formed. However, there are some best practices for corporations formed for specific reasons. For example, as to corporations formed in Delaware by founders with plans to later raise capital, the price per share is typically set at a de minimis amount – something like $.001. One reason is that Delaware charges an annual tax, which is determined partially based upon the price of the stock at incorporation. After founding, the price for each share usually goes up, particularly during later rounds of investment in the corporation, such as preferred stock. In limited liability companies (LLCs), the similar concept to price per share is price per unit. Since equity in LLCs is referred to as units (or sometimes membership interests), the price is denoted in units. Setting a price in later rounds of investment can be done internally, based on the controlling owners’ best analysis of their books and records, but will often be subject to an outside analysis, such as by a business valuation expert, especially as a company becomes more valuable and worth investing in.