Why Are We Still Using Delaware for Corporate Headquarters?

It is so automatic now that I am not sure anyone even thinks twice before saying the sentence: “I’ll form the company in Delaware.”

And we no longer think about the reasons we give, either:

• “It has the largest body of corporate case law.”
• “The outcome of disputes is more certain than in other jurisdictions.”
• “It’s customary for investment-grade entities.”
• “It will look odd if you don’t form in Delaware.”

Whether you like him or not, the Elon Musk compensation litigation cracked the glass facade. In Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024), the Delaware Court of Chancery held that Tesla’s directors breached their fiduciary duties in approving Musk’s roughly $55.8 billion pay package, found Musk to be a controlling stockholder, applied the entire-fairness standard, and ordered the entire grant rescinded. The court reaffirmed that holding after Tesla tried to cure it with a ratification vote. Tornetta v. Musk, 2024 WL 4930635 (Del. Ch. Dec. 2, 2024).

Two years later, the Delaware Supreme Court, sitting en banc, reversed the remedy — holding that rescission was improper because the parties could not be restored to where they started — and reduced the award to $1 in nominal damages. In re Tesla, Inc. Derivative Litig., 2025 WL 3689114 (Del. Dec. 19, 2025). But the reversal was narrow: the Court did not disturb the findings on control, breach, or entire fairness. So Musk won back his package, and the doctrine that produced the fight is still on the books.

That is the point. Whatever the final score in Tornetta, the case did its damage to the perception of Delaware as a predictable, management-friendly home. It launched a wave of departures, and it triggered a legislative arms race that is still running. For the last several years I have been recommending Texas to clients, and the reasons below are why. My hope is that this short article nudges you to look more closely at the answers we have been giving clients on autopilot for years.

A note on scope: my practice lives mostly in limited liability companies and limited partnerships, so that is where this article spends most of its time. The Musk saga is a public-company, controlling-stockholder story — but it is the cultural catalyst that opened the door, and the reforms it provoked reach LLCs and LPs directly.

1. The exits are real — and so is Delaware’s reaction

The trend even has a nickname: DExit. After the Tornetta decisions, Tesla’s stockholders voted to move the company’s legal home to Texas, and Musk redomiciled SpaceX there as well. They have not been alone. As reported by The New York Times in June 2026, the roster of departures now includes Andreessen Horowitz, Coinbase, and Dropbox, with most relocating companies choosing Texas or Nevada — and the list keeps lengthening. Dell Technologies’ board has approved a move to Texas, with a shareholder vote scheduled for late June 2026, and ExxonMobil — which had kept its New Jersey charter for more than a century — is reincorporating in Texas too. Delaware is still the domicile of roughly two-thirds of the Fortune 500, so this is not an obituary. But the direction of travel is unmistakable, and the boards asking the question are no longer outliers.

Delaware noticed — it had little choice. Corporate chartering generates on the order of $2 billion a year for the state, roughly a third of its budget, which is why the prospect of an exodus set off genuine alarm. In March 2025, the legislature enacted Senate Bill 21, amending Sections 144 and 220 of the Delaware General Corporation Law. Signed into law on March 25, 2025, SB 21 created statutory “safe harbors” for controlling-stockholder and other interested transactions, supplied a statutory definition of “controlling stockholder” (capturing, among others, a holder of at least 33⅓% of voting power who exercises managerial control), and trimmed back stockholder books-and-records demands under Section 220. The amendments legislatively reversed In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024), and — notably — apply to all Delaware corporations rather than being optional. The Delaware Supreme Court has since upheld their constitutionality. Rutledge v. Clearway Energy Grp. LLC, No. 248, 2025 (Del. Feb. 27, 2026).

I do not say any of this to bury Delaware. SB 21 is a serious, sophisticated response, and the Court of Chancery remains the most experienced business court in the country. I raise it to make a different point: Delaware had to legislate its way back toward the predictability everyone assumed it already offered. The premium we have paid for “the Delaware brand” was, in part, a premium for certainty — and certainty is exactly what the last two years called into question. Once you are willing to interrogate the brand, the comparison gets interesting.

2. The case for Texas — especially for LLCs and LPs

This is where my practice lives, and where Texas has quietly become compelling.

Contractual freedom in the entity statutes. The Texas Business Organizations Code (“TBOC”) gives LLC drafters enormous latitude. A company agreement may expand or restrict the duties — including fiduciary duties — and related liabilities that a member, manager, or officer owes, and may create classes of membership interests with tailored economic and voting rights. See Tex. Bus. Orgs. Code § 101.401. For limited partnerships, the freedom is comparable, and the 2025 reforms made it sharper still (more on that below). For deal lawyers structuring sponsor/investor waterfalls, this is the whole ballgame: the operating or partnership agreement, not background common law, controls.

The 2025 governance reforms (SB 29). On May 14, 2025, Governor Abbott signed Senate Bill 29, which took immediate effect after passing both chambers by supermajority. SB 29 amends the TBOC to make Texas a more predictable home for entities:

• It codifies the business judgment rule. New TBOC § 21.419 establishes a rebuttable presumption that directors and officers act (1) in good faith, (2) on an informed basis, (3) in furtherance of the entity’s interests, and (4) in obedience to law and the governing documents. The protection applies automatically to entities listed on a national exchange and to others that elect in.
• It extends parallel protections to LLCs and LPs through new TBOC §§ 101.256 and 153.163.
• For limited partnerships specifically, new TBOC § 152.002(e) lets a partnership agreement eliminate the duty of loyalty, the duty of care, and the obligation of good faith (TBOC §§ 152.205, 152.206, 152.204(b)) where the agreement expressly so provides.
• It raises the bar for shareholder litigation. A Texas entity may now require — by its governing documents — that a claimant hold a minimum stake (up to 3% of the company) before bringing a derivative fiduciary suit, and it narrows inspection demands (amended TBOC § 21.218) and lets entities fix Texas venue and even waive jury trials for internal-entity claims. The practical bite is real: the day after the Governor signed SB 29, Tesla adopted a bylaw barring holders of less than 3% from suing its directors for breach of fiduciary duty. Under that kind of threshold, the nine-share plaintiff in Tornetta never gets through the courthouse door.

For a sponsor structuring a joint venture, that is a statute built to honor the deal the parties actually struck.

3. The Texas courts have caught up

The historical trump card for Delaware was its judiciary: a dedicated Court of Chancery, expert judges, no juries in equity, and a deep, written body of precedent. For decades Texas had no real answer. It does now.

A specialized trial court. House Bill 19 (88th Leg., R.S., 2023), signed June 9, 2023, created a statewide Texas Business Court as new Chapter 25A of the Government Code. The court took effect September 1, 2023, but applies to actions commenced on or after September 1, 2024. It is organized into eleven divisions aligned with the state’s Administrative Judicial Regions, with five urban divisions — anchored in Dallas, Houston, Austin, San Antonio, and Fort Worth/Waco — operational since September 1, 2024. Its judges are appointed by the Governor with Senate consent, and — crucially for precedent-building — the court issues written opinions. Its subject-matter jurisdiction covers high-value commercial disputes (generally those exceeding $5 million in amount in controversy) and a defined set of governance and internal-affairs disputes. See Tex. Gov’t Code § 25A.004.

A specialized appellate court. Companion legislation (S.B. 1045) created the Fifteenth Court of Appeals, which sits in Austin and holds exclusive jurisdiction over appeals from the Business Court (absent Texas Supreme Court jurisdiction). It is the first operational appellate-level business court in the United States. That matters: a specialized appeals court is how a state actually develops a coherent, reviewable body of business precedent rather than a scatter of unreviewed trial rulings.

In other words, the single best argument for Delaware — “go where the judges are experts and the case law is deep” — now has a Texas analogue that is purpose-built and, by design, generating its own written precedent. The body of law is younger, yes. But it is being built on a clean, modern, pro-enterprise statutory foundation rather than a century of accreted (and recently contested) common law.

4. So, why not Texas?

Let me put the honest case for staying in Delaware first, because there is one:

• Depth of precedent. Delaware’s case law remains far deeper. If your venture turns on a novel control or merger question, there is probably a Delaware case on point and not yet a Texas one.
• Investor familiarity. Institutional investors, underwriters, and their counsel are wired for Delaware. A Series A term sheet that assumes a Delaware C-corp is still the path of least resistance, and SB 21 was specifically aimed at keeping it that way.
• A moving target. Texas’s reforms are new. Some provisions are untested in court, and the Business Court’s precedent is still thin.

Now weigh that against what Texas offers — particularly for the LLCs and LPs I work with day to day:

• Statutory contractual freedom that lets the operating or partnership agreement control, including the ability to tailor or eliminate fiduciary duties (TBOC §§ 101.401, 152.002(e)).
• A codified business judgment rule and heightened litigation thresholds that protect good-faith managers and curb opportunistic suits (TBOC §§ 21.419, 101.256, 153.163, 21.218; SB 29 (2025)).
• A purpose-built court system — the Texas Business Court and the Fifteenth Court of Appeals — designed to resolve these disputes efficiently and on the record (Tex. Gov’t Code ch. 25A; HB 19 (2023); S.B. 1045 (2023)).
• A friendlier tax posture: no personal income tax and a margin-based franchise tax untethered from share count.
• No double-registration cost for the Texas-based operating business.

It is also worth being candid about the larger critique. Some scholars warn that this interstate competition is a race to the bottom — a steady erosion of the checks that keep boardrooms honest. That concern is serious, but it lands hardest on Nevada, which commentators describe as having gone furthest in insulating managers from accountability and shutting off shareholder access to internal records; the sharpest academic warnings about a cascading decline in corporate-governance standards are aimed there, not at Texas. Texas’s path has been different in kind. Rather than simply switching off shareholder litigation, it built a specialized court system and a structured, modern statute. You can argue about whether it drew every line in the right place — the 3% threshold will strike some as too generous to incumbents — but Texas built institutions rather than dismantling them. For an LLC or LP whose value lives in a carefully negotiated agreement, that distinction matters.

Here is the through-line. For decades, “form it in Delaware” was a proxy for predictability — predictable courts, predictable law, predictable expectations. The Tornetta litigation, and the legislative scramble that followed in both states, exposed that predictability as less settled than we assumed. Texas responded by building, from scratch and on purpose, the very things the Delaware default used to stand for: a specialized judiciary, a modern statute that honors the parties’ bargain, and a manager-friendly liability regime — wrapped in a tax structure that, for a Texas business, simply costs less.

I am not telling you to abandon Delaware reflexively; that would just be trading one autopilot for another. I am telling you to stop answering on autopilot. For the next entity you form — especially an LLC or LP whose home and operations are in Texas — the better question is no longer “Why Texas?” It is “Why not?”

---

Citations

Cases

• Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024) (“Tornetta I”) (post-trial opinion; rescission of Musk compensation package).
• Tornetta v. Musk, 2024 WL 4930635 (Del. Ch. Dec. 2, 2024) (“Tornetta II”) (rejecting post-hoc stockholder ratification).
• In re Tesla, Inc. Derivative Litigation, 2025 WL 3689114 (Del. Dec. 19, 2025) (en banc, per curiam; reversing rescission remedy and awarding $1 in nominal damages).
• In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024) (legislatively superseded by SB 21).
• Rutledge v. Clearway Energy Group LLC, No. 248, 2025 (Del. Feb. 27, 2026) (upholding constitutionality of SB 21).

Statutes

• Delaware General Corporation Law §§ 144, 220 (8 Del. C. §§ 144, 220), as amended by Senate Bill 21 (signed Mar. 25, 2025).
• Tex. Bus. Orgs. Code §§ 21.218, 21.419, 101.256, 101.401, 152.002(e), 152.204(b), 152.205, 152.206, 153.163, as amended by Senate Bill 29 (signed May 14, 2025; effective immediately).
• Tex. Gov’t Code ch. 25A (Texas Business Court), enacted by House Bill 19 (88th Leg., R.S., 2023; effective Sept. 1, 2023; applicable to actions commenced on or after Sept. 1, 2024).
• Tex. S.B. 1045 (88th Leg., R.S., 2023) (creating the Fifteenth Court of Appeals).

Secondary Authority

• Michael Steinberger, Elon Musk’s Feud With Delaware May Transform Corporate America, N.Y. Times Mag. (June 17, 2026) (print headline “Dexit,” June 21, 2026) (reporting on recent reincorporations, Delaware’s chartering revenue, and the operation of SB 21 and SB 29).