Elon Musk wants to take away Delaware’s incorporation crown. It won’t be easy.

Elon Musk wants to take away Delaware’s incorporation crown. It won’t be easy.

Elon Musk

Elon Musk wants to get away from Delaware as fast as he can. It will take some convincing to get others in the corporate world to follow.

For roughly the last century, Delaware has been the dominant place for companies to file their articles of incorporation because of its corporate-friendly laws, specialized business courts, and ease of filing company documents.



The state likes to tout that it is home to more than two-thirds of all Fortune 500 companies, and earns billions each year from the companies domiciled there

Welcome To Delaware Sign, First State In Us History And First To Ratify Us Constitution In 1787. (Photo by Education Images/Universal Images Group via Getty Images)

Places like Nevada, Texas, South Dakota, North Carolina, Washington, and Wyoming that want some of this same revenue are trying to chip away at Delaware’s dominance with their own business-friendly incorporation strategies.

Those recruiting efforts got a boost last month from the world’s richest man, Musk, who advocated for Nevada and Texas after a federal judge in Delaware invalidated his $56 billion Tesla pay package.

“Never incorporate your company in the state of Delaware,” Musk said on his his social media platform X, adding that “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”



Musk pledged to move Tesla (TSLA) to Texas from Delaware if shareholders sign off on the move. He also filed to move incorporation of his private brain chip startup, Neuralink, from Delaware to Nevada.

‘Dexit’

He is not the only one. Other companies have either decamped for other states in recent years, or tried to do so. One that made the move to Nevada in 2018 referred to its exit as a “Dexit.”

It will be a challenge to loosen Delaware’s grip on where many companies file their initial paperwork.

The state added 58,000 new corporations in 2022, the most recent year for which information was available from Delaware. That was down 6% from 2021, although still up 41% since 2017.

One other measure from the US Census Bureau showed that business applications from corporations in Delaware did drop 8.5% between December 2022 and December 2023, according to IRS filings, after rising in 2021 and 2022.

One company, TripAdvisor (TRIP), is finding it difficult to leave Delaware. After a majority of shareholders approved an incorporation change from Delaware to Nevada last year, some shareholders of the online travel company sued to block it.

They alleged that the CEO of TripAdvisor’s parent company, Greg Maffei, sought out Nevada to reduce his potential for liability claims. Maffei is a controlling shareholder of that parent company, Liberty Media, which also controls voting power over TripAdvisor.

TripAdvisor has said in a filing that the move would save money on taxes and potentially provide “greater protection from unmeritorious litigation for directors and officers.”

Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, doubts that other states will be able to unseat Delaware in the near future.

“How are they going to do it?” he said.

Delaware has a significant upper hand, he added, because it has “a very smart bar, a very smart judiciary, and a very fair judiciary, with lots of experience in this area. That’s why both shareholders and managers appreciate it, because it’s fair and balanced.”

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