Publication
Choosing the Right U.S. Corporate Domicile in the Age of Dexit: Key Considerations
By Caylye Nordling and John Delikanakis
In the beginning . . . There was New Jersey.
Prior to the early 1900s, New Jersey was the preferred state of incorporation for U.S. businesses.1 Eager to cash in on America’s epic industrialization via franchise tax revenues, Delaware directly challenged New Jersey’s primacy in a well-thought-out plan. It amended its state constitution to make it easier to incorporate in Delaware, enacted a new general corporation statute, and focused resources on creating a thoughtful and respected body of common law with its Court of Chancery.2 The plan worked.
Today, Delaware remains the major domicile for U.S. entities. However, in recent years, developments in Delaware’s law, primarily via decisions handed down by the Delaware judiciary, give some individuals the sense of an increasing wariness towards management, boards, and large (often founding) shareholders. This has prompted some venture capitalists and corporate boards to re-examine whether Delaware is still the best place to be domiciled.
As businesses grow and regulatory landscapes shift, understanding the advantages and negatives of various corporate domiciles has become essential for boards, founders, and legal advisors alike. The decision of where to domicile shapes how disputes are resolved, how much tax is paid, and even how investors view the company’s credibility. In today’s world, five states consistently stand out in domicile discussions: Delaware, Nevada, Texas, Wyoming, and South Dakota. While each state markets itself as “business-friendly,” their advantages and trade-offs differ significantly depending on a company’s size, structure, and growth trajectory, as explored below. The following is a brief overview of the major points to consider.
Delaware: The Traditional Corporate Powerhouse
Delaware has generally been the gold standard of preferred corporate domicile because of its infrastructure for complex transactions, expedited corporate and commercial litigation in the Court of Chancery, and frequent statutory maintenance. Delaware is unique in its well-established case law, which provides a broad foundation for applying statutory, contractual, and common law principles to accessing capital, transaction planning, governance, and dispute resolution. Companies have broad freedom in organizing boards, shareholder rights, and management responsibilities. Delaware’s Court of Chancery has decades of experience and a long history of handling sophisticated business disputes in an expedited fashion.
Some key features of Delaware corporate law that have developed from this judiciary-focused approach are:
- Scrutiny of directors’ conduct under the Business Judgment Rule. The presumption of good faith and informed decision making is a foundational part of Delaware’s pro-business stance.3 Under this deferential standard, actions of the directors are not second-guessed as long as those actions were taken in good faith with due care and loyalty to the company, even if those decisions result in losses or mistakes.4 Only when a board action is approved by a majority of board members who have a conflict of interest in the transaction will Delaware courts apply a heightened “Entire Fairness” standard, shifting the burden to the directors to show that the decision-making process and outcome was fair to the company as a whole and did not disproportionately advantage interested members of the board.5 This standard, however, has developed through case law, not statute, and it therefore is subject to change. In fact, as recently as 2024, the Delaware courts have broadened the applicability of the Entire Fairness standard6, highlighting some fractures in the general predictability of the Court of Chancery.
- Broad ability to offer exculpation to officers and directors. Delaware law allows a company to absolve directors of any liability for a breach of the duty of care in running the business.7 Delaware law further establishes a minimum standard of conduct for determining whether a director is entitled to indemnification.8 Within these parameters, Delaware corporations have broad leeway to set the parameters for indemnification of directors and officers. However, this ability does not extend to breaches of the duty of loyalty9 and good faith10, to intentional misconduct11, or to knowing violations of law12.
- “Demand Futility” standard. When shareholders want to bring an action against directors and officers on behalf of, and in the interest of, a company, they must first issue a demand to the board that the company bring the suit.13 If the shareholders can demonstrate that such a demand would be futile, because a majority of the board would be exposed to liability in the suit and therefore would never vote to bring the action, the suit may proceed without first making the demand.14 The bar to prove demand futility is a high one, particularly because claims subject to exculpation do not pose a risk of liability, so a plaintiff cannot show that directors would not be impartial in evaluating the demand because of their exposure to liability. While shareholder derivative lawsuits can serve as an important check on corporate management, the high bar protects the directors and the company from frivolous claims.
However, Delaware also has some disadvantages, including higher franchise taxes compared to many other states. In Delaware, franchise taxes can be calculated based on an authorized share method or an assumed par value method, with the maximum fee capped at $250,000 for “large corporate filers.”15 Additionally, the regulatory complexity that can come with a Delaware domicile can be excessive for small, closely held businesses.
Delaware is the most popular choice for large corporations, especially public companies and startups seeking outside investments. Venture capital and private equity firms continue to prefer Delaware entities for familiarity and legal predictability. However, a notable, vocal, and very recent exception can be found in Andreessen Horowitz’s redomiciling in Nevada.16 In a statement posted on their website, the venture capital firm lays out its reasons for departing from Delaware, including a claim that, at times, Delaware courts can even appear biased against technology startup founders and their boards17 despite the robust body of law intended to protect them. Citing the legal uncertainty created by recent decisions as a serious concern for entrepreneurs and professional investors,18 Andreessen Horowitz is making the move to Nevada, and boldly suggests others do the same.
Nevada: Delaware of the West
Nevada has positioned itself as a corporate domicile alternative for roughly thirty years, and recent trends and efforts by Nevada ensure its ongoing relevance. Where Delaware focuses on its courts, Nevada has leaned on its corporation statute. Nevada’s greater reliance on its statute compared to common law and its extension of deferential principles of Delaware corporate law and the Model Business Corporation Act provide a more permissive governance framework. This, paired with a diminished need to rely on judicial interpretation of fiduciary duties, lesser litigation costs, and greater managerial flexibility are all attributes that make Nevada a top choice of domicile.
Some of the key features of Nevada corporate law are:
- The statutory codification of the Business Judgment Rule. Nevada has codified the business judgment rule, limiting the ability for judicial modification.19 Additionally, the Nevada Supreme Court has ruled that the business judgment rule applies even in the case of alleged breaches of the duty of loyalty, ruling that it only allows for director liability when a plaintiff has demonstrated intentional misconduct, fraud or a knowing violation of law.20 This is slightly broader and more deferential than the Delaware standard.
- Limits on director and officer exposure. Nevada law permits broader protections than Delaware against individual liability for officers and directors by allowing for exculpation for breaches of duties and good faith.21 Monetary damages are excluded if they result from any act or failure to act in a person’s capacity as an officer or director unless a plaintiff (i) rebuts a presumption that the officer or director acted in good faith and in an informed manner and (ii) proves that the act or failure to act is a breach of a fiduciary duty involving intentional misconduct, fraud or a knowing violation of law.22 Nevada’s exculpation statute works as a default, and corporations have to opt-out if they do not want to participate23; comparatively in Delaware, entities must opt in.
- Limits on the inspection of corporate records. Nevada provides only the stockholders holding 15% or greater of all the issued and outstanding shares of a corporation, the right to inspect that corporation’s books and records.24 This not only reduces an administrative burden but reduces the risk of frivolous lawsuits brought on by arbitrary and unnecessary document reviews. Additionally, corporations may escape furnishing business records if they provide a detailed annual financial statement or have filed all reports required under Section 13 and Section 15(d) of the Securities Exchange Act of 193425. This also highlights Nevada’s preference for privacy, as it allows Nevada corporations to avoid sharing board minutes and communications with shareholders.
- Interests to be considered. Nevada has adopted a constituency statute specifically broadening the interests that directors and officers may consider in making certain decisions.26 Under Nevada law, directors and officers may consider all relevant facts, circumstances, contingencies, or constituencies, including the interests of all stakeholders affected by the corporation.27 Additionally, directors and officers are not required to consider, as a dominant factor, the effect of a proposed corporate action upon any particular group or constituency having an interest in the corporation (i.e., stockholders).28 This allows for broader flexibility by boards and officers.
The Nevada legislature has additionally approved a joint resolution to amend the state constitution to allow for the establishment of a state-wide business court to direct securities litigation to judges with corporate law expertise.29 In time, this could bridge the gap between Nevada and Delaware by providing a more efficient and predictable place and process for litigation. However, this project is in the most basic planning stages and will require not only a state constitutional amendment but also the willingness to dedicate considerable funding to the proposed business court.
Additionally, Nevada does not have a corporate income or a franchise tax.30 While this is generally beneficial to companies, association with Nevada can attract scrutiny from regulators due to historical association with shell companies, and aggressive asset protection tactics.
Nevada is often chosen by small businesses and asset holders seeking anonymity and legal insulation, and as discussed above, by venture capital businesses. Nevada does seem to be gaining popularity with big business as well. Multiple major publicly traded companies including Roblox, Madison Square Garden Entertainment, AMC Networks, Sphere Entertainment, and Tempus AI, asked shareholders to vote in favor of leaving Delaware for Nevada during the 2025 proxy season and received affirmative approval to do so.31 Dropbox, Trade Desk, and Sonoma Pharmaceuticals have also made the move.32 While Delaware likely won’t lose its wide appeal anytime soon, it is clear that corporate leaders are evaluating which state’s laws are the best fit for their particular businesses, and that Nevada’s efforts have positioned it as a well-respected option for businesses of all sizes.
Texas: Building for Business
While Texas has long been a significant home to corporate operations, it has recently gained traction for more corporate entities. Following suit with Delaware, Texas opened its Business Court in 2024.33 Further, the Texas Business Operations Code (TBOC) has been amended in creative ways to impose higher hurdles on stockholder actions, including a threshold to derivative litigation and generally higher default approval standards than Delaware and Nevada.34
Some key features of Texas Corporate Law are:
- The statutory codification of the business judgment rule. Texas, like Nevada, has codified the business judgment rule for directors and officers of corporations that are publicly traded or that elect in their governing documents to be governed by the Texas business judgment rule.35 The Texas Supreme Court has ruled that the rule’s presumption may be rebutted only by “ultra vires, fraudulent, and injurious practices, abuse of power, and oppression … subversive of the rights of the minority, or a shareholder, and which … would leave the latter remediless.”36 However, unlike Nevada, Texas has retained judicially created doctrines such as the “Entire Fairness” standard, which can be used to circumvent the rule.
- Minimum ownership requirements for derivative litigation. As part of the revisions to the TBOC, publicly traded Texas corporations, or those with at least 500 shareholders that opt into the business judgment rule statute, can now require shareholders to own up to 3% of the corporation’s outstanding shares to bring a derivative claim.37 This helps curb litigation from small shareholders. In addition, publicly traded corporations headquartered in Texas or listed on a Texas exchange may prohibit stockholders from proposing action at a meeting (other than director nominations and ancillary procedural matters) unless they own at least $1 million in stock or 3% of outstanding shares.38 Nevada and Delaware do not offer similar limitations.
- Relaxed fiduciary duties. Texas case law suggests that controlling shareholders, even in a closely held corporation, do not owe formal fiduciary duties to their fellow shareholders.39 Texas courts have instead recognized that a relationship between particular shareholders may constitute a confidential relationship that gives rise to informal duties when influence and confidence in such shareholder has been created.40
- Right to inspect corporate records. Texas has expressly excluded litigation related purposes and text messages, emails, and social media communications from inspection by stockholders of certain corporations.41
Much like Nevada, while the new business court could be a promising step towards aligning with Delaware, its establishment isn’t enough to close the gap, as it will take years to develop meaningful case law and expertise. Further, an interesting distinction arises in Texas as the state constitution provides that the right to trial by jury shall be inviolate42, meaning that there is a right to a jury even in an equitable case. The potential of a jury inherently reduces the consistency of decision making in such cases, greatly reducing the consistency business owners look for.
Texas also imposes franchise taxes as percentages of a corporation’s taxable margin, which can result in fees lower than those imposed in Delaware, but higher than Nevada.43
That said, Texas is an attractive option for companies with a significant in-state presence, or those focused on long-term operations rather than raising capital.
Wyoming: Privacy and Protection
Wyoming has also gained traction as a popular entity domicile in recent years and is widely recognized as a business-friendly state: Wyoming has no corporate or personal income tax44, and offers low filing fees with minimal annual reporting requirements. It has particularly been popular for limited liability companies, boasting the highest number of per capita incorporations of any state (378 companies per 1,000 adults, compared to the U.S. average of 36 per 1,000 adults).45 Notably, Wyoming has also focused on digital asset businesses, and is working actively to attract such entities through progressive legislation and safe harbors. It has been praised for building the most comprehensive and technical coherent legal framework for digital assets, which is a result of years-long efforts by local law makers.46
Some key features that make Wyoming an attractive entity domicile are:
- Significant asset protection. Wyoming has a number of mechanisms to protect an entity’s assets. With respect to limited liability companies in particular, creditors cannot pierce the corporate veil, even in a single member limited liability company.47 A second form of asset protection protects limited liability company assets from personal creditors. By codifying these protections, Wyoming leaves little room for interpretation.
- Anonymity. Wyoming does not have requirements for listing members or revealing stockholder information to the state.48 It additionally does not collect any corporate income tax information to be shared with the IRS.49
- Wyoming also offers unique business friendly laws such as lifetime proxy voting, allowing business owners to appoint someone else to vote their shares while maintaining control.50
That said, Wyoming’s sparse legal precedent can lead to uncertainty in complex corporate disputes, limiting appeal to institutional investors or public market participants. Wyoming is likely best for small businesses, and those looking to form limited liability companies.
South Dakota: The Up and Comer?
South Dakota might not be on everyone’s corporate formation radar, but much like Wyoming, it offers significant privacy and asset protection. South Dakota allows for anonymous ownership of limited liability companies and corporations, requiring only registered agents to be listed. This keeps information out of the public record.
South Dakota also boasts one of the lowest tax burdens in the U.S. as it is one of the few states with no corporate income tax, no personal income tax, no franchise tax, and no business inventory tax.51 It also offers lower filing fees than other states.
While South Dakota may currently lack the prestige and historical precedent of other states, it is positioning itself well as a jurisdiction for private, remote-based, or asset-focused businesses seeking confidentiality.
Final Thoughts
There is no “one-size-fits-all” corporate domicile. Delaware remains the dominant player for serious fundraising and governance certainty. It boasts a body of well-developed case law and has shaped a judicial process that is expedient in delivering fairly predictable outcomes, although, many question the recent direction and predictability of that case law. Nevada and Texas are working to position themselves similarly, but time will tell whether they succeed. For now, they offer a practical alternative for businesses looking for less complexity and clearer, bright-line tests. Wyoming and South Dakota offer privacy and protection, but with less legal depth than any of the other states mentioned.
Before deciding, companies should consider where they operate, their growth goals, their exposure to litigation, and their plans for capital raising. For many, the choice of domicile isn’t just a filing – it’s a long-term strategic move.
Footnotes
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See Samuel Arsht, A History of Delaware Corporate Law, 1 Del. J. Corp. L. 1, (1976);
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Arsht, supra note 5, at 6–7; How Delaware Became No. 1, NY Times (May 9, 1976), https://www.nytimes.com/1976/05/09/archives/how-delaware-became-no-1.html.
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https://corplaw.delaware.gov/delaware-way-business-judgment/.
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Id.
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See Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2014).
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See In re Match Group, Inc. Derivative Litigation, No. 368, 2022 (Del. 2024).
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See 8. Del. C. § 102(b).
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See 8 Del. C. § 145(b).
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See 8. Del. C. § 102(b)(7)(i).
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See 8. Del. C. § 102(b)(7)(ii).
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Id.
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Id.
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See United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg 262 A.3d 1034 (Del. 2021).
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See 8. Del. C. § 503(a).
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https://a16z.com/were-leaving-delaware-and-we-think-you-should-consider-leaving-too/
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Id.
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Id.
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See Nev. Rev. Stat. § 78.138(7).
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Guzman v. Johnson, 483 P.3d 531, 537 (Nev. 2021) (“Applying the same rationale, we now conclude that the inherent fairness standard cannot be utilized to rebut the business judgment rule and shift the burden of proof to the individual directors. Such a standard would contravene the express provisions of NRS 78.138(7) and render meaningless the statute’s requirement that the plaintiff must establish a breach involving intentional misconduct, fraud, or a knowing violation of law.”); see also In re Newport Corp. S’holder Litig., 507 P.3d 182 (Nev. 2022) (“The cases shareholders provide do not substantiate their claims because they apply Delaware’s less-forgiving inherent-fairness standard to assess the directors’ actions, which Nevada does not.”).
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See Michal Barzuza, Nevada v. Delaware: The New Market for Corporate Law 18 (Eur. Corp. Governance Inst., Law Working Paper No. 677/2251, 2024) at 23.
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Id.
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Id.
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Nev. Rev. Stat. § 78.257.
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Securities Exchange Act of 1934 §§ 13, 15(d), 15 U.S.C. §§ 78m, 78o(d).
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See Nev. Rev. Stat. § 78.138(4).
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Id.
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Nev. Rev. Stat. § 78.138(5).
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Assembly Bill No. 239 (AB 239).
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Ellen Schulhofer & Albert Z. Kovacs, Corporation Law: Nevada, Practical Law State Q&A 9-517-8404, (July 2023).
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Id.
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Adolfo Pesquera, The Business Courts Are Coming—Can They Meet Expectations?, Law.com (July 20, 2023), https://www.law.com/texaslawyer/2023/07/20/the-business-courts-are-coming-can-they-meet-expectations/.
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TBOC 21.419.
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Sneed v. Webre, 465 S.W.3d 169, 173 (Tex. 2015).
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TBOC 21.552(a).
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TBOC 21.373.
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See Ritchie, 443 S.W.3d at 876 n.27 (“With regard to formal fiduciary duties, this Court has never recognized a formal fiduciary duty between majority and minority shareholders in a closely-held corporation.”); Hoggett v. Brown, 971 S.W.2d 472, 488 (Tex. App. 1997) (“Similarly, a co-shareholder in a closely held corporation does not as a matter of law owe a fiduciary duty to his co-shareholder.”); Willis v. Donnelly, 199 S.W.3d 262, 276 (Tex. 2006) (declining to address whether a majority shareholder in a closely held corporation owes a minority shareholder a general fiduciary duty under Texas law).
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See Flanary v. Mills, 150 S.W.3d 785, 794 (Tex. App. 2004) (“While shareholders generally do not owe each other a fiduciary duty, they may in some circumstances, such as when a confidential relationship exists. A confidential relationship exists where influence has been acquired and confidence has been justifiably reposed. A person is justified in placing confidence in the belief that another party will act in his or her best interest only where he or she is accustomed to being guided by the judgment or advice of the other party, and there exists a long association in a business relationship, as well as personal friendship.”) (internal citations and quotations omitted); Ritchie, 443 S.W.3d at 876 n.27 (Tex. 2014) (“Informal fiduciary duties arise from a moral, social, domestic, or purely personal relationship of trust and confidence.”) (internal quotations omitted).
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TBOC 21.218(b), (b-2), (b-3).
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Texas Constitution, Article I, § 15.
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Franchise Tax Overview, Tex. Comptroller (2023), https://comptroller.texas.gov/taxes/publications/98-806.php.
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https://www.sltrib.com/news/2025/07/14/crypto-giant-kraken-moved-cheyenne/.
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WY Stat § 17-29-503 (2024).
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WY Stat § 17-16-722 (2024).
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About Snell & Wilmer
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