Paid-Up Capital: Definition and Key Points

What is paid-up capital?

Paid-up capital (also called paid-in or contributed capital) is the equity a company receives from shareholders in exchange for issued shares. It represents funds actually paid to the company on the primary market (for example, through an initial public offering). Transfers of shares on secondary markets do not create paid-up capital because proceeds go to selling shareholders, not the company.

How it works

• A company issues shares with a par (nominal) value. Par value is a stated face value—often very small.
• Investors pay the company for those shares. The portion equal to par value is recorded as common or preferred stock; any amount paid above par is recorded as additional paid-in capital (paid-in capital in excess of par).
• Paid-up capital increases only when the company issues new shares on the primary market.

Components and related terms

• Par value (nominal value): the face value per share stated in the corporate charter.
• Common stock / Preferred stock: line item reflecting par value × number of issued shares.
• Additional paid-in capital: amount paid by investors above par value.
• Paid-up capital: sum of par value and additional paid-in capital.
• Called-up capital: funds the company has requested shareholders to pay but has not yet received.

Paid-Up Capital vs. Authorized Capital

• Authorized capital: the maximum amount of capital a company is permitted to raise by issuing shares, as set when registering the company.
• Paid-up capital can never exceed authorized capital.
• Companies often set authorized capital higher than immediate needs to allow future share issuances without reauthorization.

Where it appears on the balance sheet

Paid-up capital is reported in shareholders’ equity, typically shown as:
* Common stock (par value)
* Additional paid-in capital (amount over par)
Total paid-up capital is the sum of those lines.

Example

If a company issues 100 shares with a par value of $1 and sells each for $50:
* Common stock (par value) = 100 × $1 = $100
* Additional paid-in capital = 100 × ($50 − $1) = $4,900
* Total paid-up capital = $5,000

Why it matters

• Paid-up capital represents long-term equity financing—money that is not borrowed.
• The level of paid-up capital indicates how much a company relies on equity versus debt; comparing paid-up capital to debt helps assess financial leverage and capital structure health.
• A company that has sold all authorized shares is “fully paid-up” unless it obtains authorization to issue more shares.

Key takeaways

• Paid-up capital is equity received by the company from shareholders on the primary market.
• It comprises par value plus any amount paid above par (additional paid-in capital).
• Paid-up capital cannot exceed authorized capital.
• It is recorded in the equity section of the balance sheet and signals the company’s reliance on equity financing rather than debt.