Incorporation Destination: How Texas, Nevada and Oklahoma are competing with Delaware to attract incorporations

We have previously discussed the benefits and process of UK companies incorporating a subsidiary in the US or “flipping up” to a new US topco, specifically in Delaware ( See: The what, how and why on UK businesses doing a “Delaware Flip” to break in to the US market). Historically, Delaware has been the most widely chosen jurisdiction for US incorporations given its business-friendly legal and tax environment and dedicated corporate court system which has developed an unrivalled body of common law applicable to corporate disputes. For the time being, Delaware remains the preeminent state of incorporation in the US, tallying 2 million incorporated business entities, with approximately 68 percent of Fortune 500 companies choosing to be Delaware corporations. However, increasingly, other states are looking to compete with Delaware and have begun to adapt their corporate laws and legal and tax systems to become more aligned with Delaware. Three states in particular (Texas, Nevada and Oklahoma) are competing to become the next “incorporation destination.”

Since 2024, a number of large corporations, including Tesla, TripAdvisor and DropBox, have left Delaware to reincorporate in another state, a movement coined “DExit.” This movement coincides with high-profile cases in Delaware including, notably, a recent decision to strike down Elon Musk’s shareholder-approved $56 billion compensation package, which have caused concerns that decision-making in Delaware’s Court of Chancery is becoming less predictable. In response to “DExit”, regulators in Texas, Nevada and Oklahoma have recently implemented changes to their corporate laws or court systems in an attempt to attract new incorporations and reincorporations to their states.

In 2024, Texas opened a specialised business court designed to mimic Delaware’s Court of Chancery and has since implemented a number of statutory changes designed to restrict shareholders’ rights and bolster the rights of members of management and boards. These changes include imposing a minimum beneficial ownership requirement for shareholders to bring a derivative claim against a company, as well as giving companies the ability to waive jury trials in their governance documents and restricting the information shareholders are entitled to have access to and to inspect. Alongside these reforms, Texas is already attractive to businesses since it does not impose state-level corporate income tax.

Nevada has similarly followed suit with various revisions to its corporate law that allow for waiver of jury trials, limitations on liability for controlling stockholders and a defined statutory duty for controlling stockholders which requires them not to attempt to overexert influence on management. Nevada also does not impose state-level corporate income tax and is also currently considering creating a business court.

Recently, Oklahoma’s legislature has approved business courts in two cities, Oklahoma City and Tulsa, although this action is currently being challenged in the courts. Additionally, over the past year, officials have made changes to over 60 business entity laws, including giving more authority to boards to issue stock, adding protections from monetary liability for officers who are in breach of fiduciary duties and expanding upon indemnification rights for directors and officers.

As these other states continue to make efforts to compete for incorporation business, it is unclear whether any of them will ultimately succeed in unseating Delaware as the leader in this area. While these states are taking steps to address specific concerns about the state of play that currently exists among business stakeholders, Delaware has decades of well-developed case law and a respected reputation that has taken time to build and which is unlikely be toppled easily. Delaware, too, continues to evolve. In an attempt to curtail the “DExit” departures, in March 2025, Delaware passed a new bill, which the Delaware Senate has deemed the “most significant single-year revision of Delaware’s corporate code since at least 1967.” The bill, following a similar pattern as Texas, Nevada and Oklahoma, introduced protections for monetary damages for director liability for breaches of fiduciary duties, restrictions to stockholder inspection rights and outlines more procedures around the influence of controlling stockholders.

Who will win?

While other states may or may not ultimately prevail in attracting a meaningful portion of Delaware’s incorporation business, there is something to be said about a competitive “incorporation” market developing in the US enabling businesses looking to expand into the country or already incorporated in a particular state to ‘shop’ around for an incorporation or reincorporation state that might better cater to their specific needs. At a minimum, it is clear that this race will encourage continuing corporate reform as states adapt their laws and set new company-friendly standards.