Delaware or Texas: Where Should You Incorporate in 2025?
If you're launching a startup in 2025, one of your first questions might be: “Where should I incorporate?” For decades, the most popular answer has been Delaware. It’s the state most venture capitalists expect, the one most public companies call home, and the one with the most developed corporate law.
But recent dissatisfaction with certain Delaware rulings and simmering frustrations with the high cost of maintaining Delaware entities has resulted in several high-profile exits, and fierce competition among states to attract businesses.
While Andreessen Horowitz recently announced it was moving its legal home from Delaware to Nevada, accompanied by a blog post encouraging others to follow, Texas is emerging as the most serious contender for Delaware’s crown. With new business-friendly laws, a favorable regulatory environment, a growing economy and lower costs, Texas also promises to offer relief from what some view as increasing unpredictability in Delaware’s legal landscape.
So—which one is right for your company?
DExit: Why Some Founders Are Reconsidering Delaware
Delaware’s reputation is well-earned, but it comes with trade-offs. Delaware’s specialized Court of Chancery and its body of jurisprudence has long been cited as a reason to incorporate in Delaware. However, Delaware’s annual franchise taxes can be steep, and for early-stage companies, the combined costs of incorporating in Delaware, qualifying to do business elsewhere, and paying additional taxes can be burdensome. If your company is based outside Delaware, you will also need to hire a registered agent there and may need out-of-state legal counsel if disputes arise.
Some founders are also rethinking Delaware after the Tornetta v. Musk case. In that case, Tesla’s board approved a performance-based compensation plan for Elon Musk valued at up to $55.8 billion. A Tesla shareholder sued Musk and the board, alleging breaches of fiduciary duties. The Delaware Court of Chancery found the deal unfair due to Musk’s influence over the board and ordered the entire pay package to be rescinded. Critics viewed the decision as a signal that Delaware courts may be more willing to challenge founder-controlled boards in favor of shareholder protections, a shift that’s resulting in some entrepreneurs reconsidering Delaware incorporation. After all of this, both Tesla and SpaceX moved their state of incorporation to Texas.
However, while these recent departures from Delaware have made headlines, they have not yet had a meaningful impact on investor behavior. The vast majority of institutional investors, venture firms and public market players still favor Delaware, and for good reason. Delaware offers the most predictable and deeply developed body of corporate law in the country, applied by expert judges in a dedicated business court system. Investors trust that disputes will be resolved quickly, fairly and based on decades of precedent, not political or local pressures. (For more information on Delaware’s specialized business courts, read Choosing Your Business Court: What Texas's New Business Court Means for Contracts and Strategy.)
Incorporating in Delaware still signals to many that a company is serious, transparent and ready to scale.
Delaware: The reports of my death are greatly exaggerated.
Delaware is moving quickly to address concerns and maintain its position as the gold standard. In 2025, Delaware passed Senate Bill 21, which is a set of updates to its corporate law designed to keep it competitive, especially in response to national trends and high-profile court cases like Tornetta v. Musk.
The reforms include faster ways for companies to amend their charters, new powers for managing digital assets, and tighter guardrails around shareholder demands to inspect internal documents. Delaware is continuing to evolve strategically while preserving the legal clarity that founders and investors rely on.
“You can all go to [Delaware] … and I will go to Texas”: What Makes Texas Attractive
One perpetual challenge of Delaware incorporation is that while many states are incorporated in Delaware, few are headquartered there. In contrast, Texas has been the focus of a major corporate exodus in recent years, welcoming relocations and expansions by major corporations from across the country, including Chevron, Oracle and Charles Schwab.
Texas is coming in hot, and it is determined not to miss the moment. It has welcomed high-profile relocations with major pieces of business-friendly legislation designed to favor management and limit shareholder disruptions. For example, Texas now requires shareholders to own at least 3% of a company before they can sue on its behalf, and 5% before they can request access to internal records. Environmental, Social, and Governance activism has also been curbed by requiring proxy firms to certify neutrality.
New business courts launched in 2024 aim to offer faster, more focused handling of corporate cases, coupled with the codification of the business judgment rule. Texas also offers no corporate income tax for many businesses and lower filing fees. These factors, and a pro-business political climate, make Texas attractive to some.
However, other aspects of Texas corporate law may also come as a surprise to investors. For example, certain “fundamental actions” require a 2/3 class vote of shareholders. This could provide founders with a blocking right on certain corporate actions.
Which Should You Choose?
On one hand, Texas has passed laws that make life easier for company leaders. It is now harder for very minor shareholders to sue, more difficult for investors to dig through company emails, and tougher for outside groups to push political or environmental agendas.
However, if you are looking for institutional funding, Delaware may still be the better place to start or grow your company. Delaware has clear, stable rules that have been tested in court for decades and most importantly, regularly updates its corporate laws to adapt to shifting trends and respond to criticism and stakeholder feedback. In response to concerns raised by cases like Tornetta v. Musk, it acted swiftly to pass SB21, giving companies protections similar to those offered by Texas and Nevada, such as shielding companies from minority shareholder lawsuits in certain transactions with controlling shareholders, reducing the ability for shareholders to make burdensome books and records requests, and giving boards more freedom to make decisions.
While Texas is gaining momentum, in many ways it is still unproven. Delaware is safer, smarter and tested—especially if you’re building something big and want people to invest in it. If you’re split between the two, moving your headquarters in Texas while maintaining Delaware incorporation may be a path to reap the benefits offered by both states.
But recent dissatisfaction with certain Delaware rulings and simmering frustrations with the high cost of maintaining Delaware entities has resulted in several high-profile exits, and fierce competition among states to attract businesses.
While Andreessen Horowitz recently announced it was moving its legal home from Delaware to Nevada, accompanied by a blog post encouraging others to follow, Texas is emerging as the most serious contender for Delaware’s crown. With new business-friendly laws, a favorable regulatory environment, a growing economy and lower costs, Texas also promises to offer relief from what some view as increasing unpredictability in Delaware’s legal landscape.
So—which one is right for your company?
DExit: Why Some Founders Are Reconsidering Delaware
Delaware’s reputation is well-earned, but it comes with trade-offs. Delaware’s specialized Court of Chancery and its body of jurisprudence has long been cited as a reason to incorporate in Delaware. However, Delaware’s annual franchise taxes can be steep, and for early-stage companies, the combined costs of incorporating in Delaware, qualifying to do business elsewhere, and paying additional taxes can be burdensome. If your company is based outside Delaware, you will also need to hire a registered agent there and may need out-of-state legal counsel if disputes arise.
Some founders are also rethinking Delaware after the Tornetta v. Musk case. In that case, Tesla’s board approved a performance-based compensation plan for Elon Musk valued at up to $55.8 billion. A Tesla shareholder sued Musk and the board, alleging breaches of fiduciary duties. The Delaware Court of Chancery found the deal unfair due to Musk’s influence over the board and ordered the entire pay package to be rescinded. Critics viewed the decision as a signal that Delaware courts may be more willing to challenge founder-controlled boards in favor of shareholder protections, a shift that’s resulting in some entrepreneurs reconsidering Delaware incorporation. After all of this, both Tesla and SpaceX moved their state of incorporation to Texas.
However, while these recent departures from Delaware have made headlines, they have not yet had a meaningful impact on investor behavior. The vast majority of institutional investors, venture firms and public market players still favor Delaware, and for good reason. Delaware offers the most predictable and deeply developed body of corporate law in the country, applied by expert judges in a dedicated business court system. Investors trust that disputes will be resolved quickly, fairly and based on decades of precedent, not political or local pressures. (For more information on Delaware’s specialized business courts, read Choosing Your Business Court: What Texas's New Business Court Means for Contracts and Strategy.)
Incorporating in Delaware still signals to many that a company is serious, transparent and ready to scale.
Delaware: The reports of my death are greatly exaggerated.
Delaware is moving quickly to address concerns and maintain its position as the gold standard. In 2025, Delaware passed Senate Bill 21, which is a set of updates to its corporate law designed to keep it competitive, especially in response to national trends and high-profile court cases like Tornetta v. Musk.
The reforms include faster ways for companies to amend their charters, new powers for managing digital assets, and tighter guardrails around shareholder demands to inspect internal documents. Delaware is continuing to evolve strategically while preserving the legal clarity that founders and investors rely on.
“You can all go to [Delaware] … and I will go to Texas”: What Makes Texas Attractive
One perpetual challenge of Delaware incorporation is that while many states are incorporated in Delaware, few are headquartered there. In contrast, Texas has been the focus of a major corporate exodus in recent years, welcoming relocations and expansions by major corporations from across the country, including Chevron, Oracle and Charles Schwab.
Texas is coming in hot, and it is determined not to miss the moment. It has welcomed high-profile relocations with major pieces of business-friendly legislation designed to favor management and limit shareholder disruptions. For example, Texas now requires shareholders to own at least 3% of a company before they can sue on its behalf, and 5% before they can request access to internal records. Environmental, Social, and Governance activism has also been curbed by requiring proxy firms to certify neutrality.
New business courts launched in 2024 aim to offer faster, more focused handling of corporate cases, coupled with the codification of the business judgment rule. Texas also offers no corporate income tax for many businesses and lower filing fees. These factors, and a pro-business political climate, make Texas attractive to some.
However, other aspects of Texas corporate law may also come as a surprise to investors. For example, certain “fundamental actions” require a 2/3 class vote of shareholders. This could provide founders with a blocking right on certain corporate actions.
Which Should You Choose?
On one hand, Texas has passed laws that make life easier for company leaders. It is now harder for very minor shareholders to sue, more difficult for investors to dig through company emails, and tougher for outside groups to push political or environmental agendas.
However, if you are looking for institutional funding, Delaware may still be the better place to start or grow your company. Delaware has clear, stable rules that have been tested in court for decades and most importantly, regularly updates its corporate laws to adapt to shifting trends and respond to criticism and stakeholder feedback. In response to concerns raised by cases like Tornetta v. Musk, it acted swiftly to pass SB21, giving companies protections similar to those offered by Texas and Nevada, such as shielding companies from minority shareholder lawsuits in certain transactions with controlling shareholders, reducing the ability for shareholders to make burdensome books and records requests, and giving boards more freedom to make decisions.
While Texas is gaining momentum, in many ways it is still unproven. Delaware is safer, smarter and tested—especially if you’re building something big and want people to invest in it. If you’re split between the two, moving your headquarters in Texas while maintaining Delaware incorporation may be a path to reap the benefits offered by both states.