Three states have launched a coordinated challenge to Delaware's century-long dominance as America's premier destination for corporate incorporation, with lawmakers in Texas, Oklahoma, and Nevada approving business-friendly legislation designed to lure companies away from the First State.
The legislative push, which gained momentum following high-profile corporate departures from Delaware, represents the most serious threat to Delaware's $1.8 billion annual franchise tax revenue in decades. Delaware officials have responded with their own legal reforms to maintain their competitive edge in the lucrative incorporation market.
Texas Governor Greg Abbott signed two bills into law in May 2025 that fundamentally reshape the state's approach to corporate governance12. Senate Bill 29, which took effect immediately, codifies the business judgment rule and allows corporations to impose minimum ownership requirements on shareholders filing derivative lawsuits2. The legislation also permits companies to waive jury trials and restricts access to corporate records3.
Oklahoma's Republican-controlled Legislature approved the creation of business courts in its two largest counties, while Nevada lawmakers passed corporation-friendly updates to state business laws and moved toward establishing a dedicated business court through a constitutional amendment14.
The competition intensified after a Delaware judge invalidated Elon Musk's $56 billion Tesla compensation package, prompting the billionaire to recommend Texas and Nevada as superior incorporation destinations12. Musk's companies subsequently relocated: Tesla and SpaceX moved to Texas, while Neuralink shifted to Nevada13.
"I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters," Musk posted on X following the Delaware court ruling2. The moves by one of the world's most prominent entrepreneurs sent ripples through the corporate world, with other companies reconsidering their domiciles.
Concerned about losing millions in franchise taxes, Delaware enacted Senate Bill 21 in March 2025, which gives companies more flexibility in handling conflicted transactions12. The law allows corporations to use either board or shareholder approval, rather than both, to gain business judgment rule protection for certain deals2.
Despite the competitive pressure, Delaware continues to process the vast majority of new corporate incorporations, with many venture capital firms still requiring Delaware incorporation as a condition of funding32. The state's Court of Chancery, established in 1792, maintains substantial advantages in legal precedent and judicial expertise that newer business courts lack3.
Critics argue Texas faces unique intellectual property litigation risks that may offset its corporate law advantages4.
