Should You Still Incorporate in Delaware? Nevada and Texas Are Making Their Pitch
Delaware has been virtually the default jurisdiction of incorporation for U.S. companies. There are numerous reasons for that, including a modern statute; an expert court system; and a deep body of case law that gives boards and investors predictability. Today, roughly two-thirds of Fortune 500 companies are Delaware corporations and most U.S. IPO issuers choose the state. [1] Still, after several recent high-profile corporate cases and a wave of statutory reforms across several other states, more companies are at least asking the question that would have been almost unheard of just a few years ago: should we be somewhere else? Nevada and Texas are the most prominent examples of other states stepping forward with a competitive pitch to companies. Both claim they can offer less friction, clearer rules for directors and officers, and, in some cases, lower ongoing costs.
Why Delaware Has Been the Default
Delaware’s historical dominance has three primary bases. First, the Delaware General Corporation Law (DGCL) is a robust and extensive governing statute that is frequently reviewed and updated by the legislature. [2] Second, corporate disputes are heard by the Court of Chancery, a non-jury court with judges steeped in the DGCL and business law more generally. [3] Third, there is an enormous volume of precedents, which helps boards and counsel predict how courts will view deals, governance choices, and conflicts. [4]
Why Some Companies Are Looking Elsewhere
Although Delaware’s fundamentals largely remain intact, a handful of prominent moves, together with loud criticism from some investors and founders, have put a spotlight on alternatives. In July 2025, Andreessen Horowitz announced it would move its primary entity from Delaware to Nevada and urged founders to consider doing the same, arguing that recent court decisions introduced “unprecedented subjectivity.” [5] [6] News coverage further amplified that. [7] As a result, governance advisors report a small but noticeable uptick in reincorporation proposals leaving Delaware, with Nevada the leading destination and Texas an increasingly active second. Through June 2025, independent trackers tallied roughly 18 proposals to exit Delaware, most of which contemplated a move to Nevada, with approval rates varying by company and investor base. [8]
What Nevada Is Offering
Nevada has long pursued a “statute-first” model that reduces personal liability risk for directors and officers. In many circumstances, liability is limited unless a plaintiff can show intentional misconduct, fraud, or knowing violation of law. [9] In May 2025, Nevada continued down this road, adopting Assembly Bill 239, a wide-ranging set of amendments designed to maintain Nevada’s competitive advantage as a leader in stable, predictable corporate law. Among other things, AB 239 clarifies limited fiduciary duties for controlling stockholders, permits corporations to include jury-trial waivers for internal corporate claims, and streamlines certain holding-company reorganizations. [10] On the cost side, Nevada has no state corporate income tax. It does impose a Commerce Tax, but only on Nevada-sourced gross revenue over $4 million per year. [11][12] For companies with modest in-state revenue, Nevada’s cost structure can compare favorably to Delaware’s annual franchise tax, which scales with authorized shares or assumed par value. Additionally, the Nevada legislature has proposed a constitutional amendment which, if adopted, would establish a distinct business court with appointed judges and exclusive jurisdiction over certain business matters, similar to Delaware’s chancery courts. Note though that amending the Nevada Constitution will not be put to a referendum until at the earliest 2027 and there can be no assurances today that such a business court structure will ever be implemented.
What Texas Is Offering
Texas is pursuing a different strategy: building a Delaware-style forum and pairing it with new governance levers. Texas has built a specialized forum for complex commercial disputes by launching the Business Court and a dedicated Fifteenth Court of Appeals, both of which began hearing cases on September 1, 2024. In the court’s first six months, more than 80 business cases were filed across its initial divisions, a clear early signal that the docket is real and growing. In May 2025, Texas enacted Senate Bill 29, a package that (among other things) codifies the business-judgment rule for public companies (and for private companies that opt in); permits corporations to require a minimum ownership stake—capped at 3% of a company’s outstanding stock—to bring derivative actions, a screen that Delaware does not provide; authorizes exclusive-forum clauses for internal corporate claims; and allows corporations to include jury-trial waivers for those internal claims. [13] These changes aim to make outcomes more predictable and to reduce low-merit litigation. Texas also enacted Senate Bill 1057, effective September 1, 2025, providing for a similar minimum ownership stake as under Senate Bill 29 but with respect to shareholder proposals. Under this law, nationally-listed Texas corporations (that opt in) may require a proponent of most shareholder proposals to hold at least either 3% of the voting shares or $1 million of stock and to meet other specified solicitation requirements. [14]
What Delaware Is Doing in Response
Delaware has not stood still. In 2024, Delaware clarified board-approval mechanics for “substantially final” merger agreements and expressly authorized parties to specify deal-failure remedies, including “lost premium” damages in appropriate cases. [15] In March 2025, Delaware enacted further changes, including statutory “safe-harbor” procedures for conflicted-party transactions, spelling out how disinterested director or stockholder approval can restore business-judgment-rule deference, and tightened guardrails around stockholder books-and-records demands to help curb overbroad demands. [16] These are notable pro-predictability moves, even as they sparked debate in the governance community about how far they go and how they interact with existing case law. [15][16]
Practical Considerations
An initial choice of jurisdiction of incorporation, and even more so a consideration of reincorporating elsewhere, should not be taken lightly. The following are some important factors to consider.
- Investor expectations and governance profile. What do your current and likely future investors (including lenders) expect? Some institutions prefer Delaware. Others are agnostic if governance terms are within market. Consider whether your governance package will draw opposition in Nevada or Texas that it would not draw in Delaware. [8]
- Where you operate. If your headquarters, assets, employees, customers, and key vendors are concentrated in Texas, a Texas forum can reduce friction and may align better with regulators and juries. Conversely, if you are located on the East Coast, Delaware may still be a better jurisdiction of incorporation. [13]
- Board and officer risk tolerance. In several respects, Nevada (as amended by AB 239) is more protective of directors and officers than Delaware: it codifies a higher fault threshold for personal liability (no liability absent intentional misconduct, fraud, or knowing violation of law) and allows corporations to adopt jury trial waivers for internal corporate claims in the articles. In contrast, Texas’s 2025 reforms don’t so much expand fiduciary defenses as they reduce litigation pressure [10][13]
- Cost profile. Delaware’s franchise tax can be material for companies with large authorized-share counts. Nevada’s Commerce Tax applies only above $4 million of Nevada-sourced revenue; many smaller or pre-revenue issuers will not owe it. Texas has no corporate income tax but does impose a franchise (“margin”) tax; most small businesses under the current $2.47 million receipts threshold are outside the tax base. [11][12][18]
- Timing and execution risk. Reincorporation requires a shareholder meeting and proxy disclosure, which can be time consuming. It may require revisiting indemnification, advancement, D&O insurance, and existing investor agreements. Proxy advisors and some institutions will scrutinize the rationale and the governance changes you pair with the move. [8]
Bottom Line
Although there is a lot of talk about “DExit,” so far there does not appear to be an exodus away from Delaware and the state appears to remain the safe, well-understood default for many companies, especially those with national investor bases, near-term IPO plans, or complex M&A on the horizon. Nonetheless, the numbers are modest but real enough to merit board-level attention. Governance services report that, through mid-2025, Nevada captured the majority of proposed exits from Delaware, with Texas attracting a small but notable share. [8] Press coverage highlights several marquee moves (e.g., Dropbox, Tripadvisor, certain Elon Musk–affiliated entities, and Andreessen Horowitz), and Nevada officials are openly courting more. [5][6][17] Delaware, for its part, continues to attract new formations and remains the leading domicile for large public companies and IPO issuers. [1]
The right choice for jurisdiction of incorporation for your company depends on your specific facts and circumstances, including where you operate, who owns you, your litigation and risk profile, and how you plan to grow. If incorporation location has not been revisited in a while, or if your shareholder base has changed, it is reasonable to at least put this on a board agenda and walk through the legal and structural differences, as well as the practical considerations, internally and with counsel. We will continue keep an eye on, and notify our clients of, further changes by these and other states, as well as future trends by corporations as some of the statutory amendments and other developments discussed in this article have had some time to play out.
Our Corporate and Securities Practice Group is experienced in the entire range of M&A, financings, corporate governance and related matters, and offers a sophisticated and cost-effective alternative to BigLaw rates without compromising quality. Please feel free to contact Robert L. Lawrence, rlawrence@kanekessler.com at 212-519-5103 or Peter R. Herman, pherman@kanekessler.com at 212-519-5118 with any questions regarding this Article or any other matter you may want to discuss.
Kane Kessler, P.C. is a full-service, general practice law firm with expertise in multiple disciplines, including Corporate, Securities and Capital Markets, Mergers and Acquisitions, Finance, Litigation, Intellectual Property, Real Estate, and Trusts and Estates.
Sources
1. Delaware Division of Corporations, 2024 Annual Report (share of Fortune 500; formations; IPO share).
2. Harvard Law School Forum on Corporate Governance, “Delaware’s Status as the Favored Corporate Home: Reflections and Considerations” (May 8, 2024).
3. American Bar Association, “Delaware’s Shifting Judicial Role in Business Governance” (Fall 2022).
4. Harvard Business Services, Inc., “What Is the Delaware Court of Chancery?” (June 19, 2023).
5. Andreessen Horowitz, “We’re Leaving Delaware—and We Think You Should Consider Leaving Too” (July 9, 2025).
6. Financial Times, Texas vs Nevada — the battle to woo companies is heating up (May 26, 2025) (subscription required).
7. Business Insider, “Elon Musk urged businesses to ditch Delaware. Nevada saw an opportunity.” (August 17, 2025).
8. ISS Insights, “The U.S. Reincorporation Race: Who’s in the Lead?” (July 16, 2025).
9. Nevada Revised Statutes, § 78.138 (director and officer liability standard).
10. Nevada Assembly Bill 239 (2025).
11. Nevada Department of Taxation, Commerce Tax overview.
12. Nevada Department of Taxation, Commerce Tax FAQs.
13. Texas SB 29 (2025).
14. Texas SB 1057 (effective Sept. 1, 2025).
15. 2024 DGCL amendments (SB 313) — including §147 and §261.
16. 2025 DGCL amendments (SS 1 for SB 21) — including §144 and §220.
17. Business Insider, “Texas is on the verge of handing Tesla and other big businesses a major win” (May 9, 2025).
18. Texas Comptroller, franchise (margin) tax thresholds and rates (No-Tax-Due threshold $2.47 million for 2024–2025).