Quote:
Musk's Response
Musk immediately took to social media platform X posting "Never incorporate your company in the state of Delaware." Later, he posted that the company would "move immediately to hold a shareholder vote" on whether to reincorporate Tesla in favor of Texas. Now Musk is accusing Delaware of locking its doors, preventing companies from leaving Delaware.
Musk is known for moving to more favorable states. He moved the carmaker's headquarters from California to Texas to get away from high labor costs and stringent regulations. It also doesn't hurt that now Musk moved to Austin, he does not have to pay state income tax.
Why Is Delaware Popular for Corporations?
Tesla investors may not want to move out of Delaware. Unlike some states, Delaware does not tax corporate income earned outside of the state and has a set body of laws for corporate governance, ones that are generally considered business-friendly.
Delaware is unique in that it has a Court of Chancery with special jurisdiction to hear corporate matters. The judges have experience in complex corporate lawsuits so that companies can have issues resolved in a timely manner. And because there are no juries, the outcomes of legal disputes are more predictable.
Why Do Some Companies Want to Reincorporate Elsewhere?
While most companies favor Delaware as the best place to incorporate, some do not like this jurisdiction. In recent cases, Delaware has held that shareholders can hold corporate officers accountable for their actions. Corporations fear that Delaware may be "too friendly to shareholders."
Recently, the head of TripAdvisor's parent company, Gregory Maffei, sought to move TripAdvisor's corporate home from Delaware to Nevada in an effort to shield directors from shareholder lawsuits for breach of fiduciary duties. Nevada codified a business judgment rule that presumes officers and directors act in good faith and should only be liable when their misconduct is intentional, fraudulent, or in known violation of the law. Shareholders are trying to block TripAdvisor's reincorporation in Nevada, claiming the move will help Maffei escape potential liability for self-dealing.
Yep, great knowledge here and what I found.one MEEN Ag said:
I looked into it. You pay a relatively steep price to gain the benefits (full anonymity if you want it). They have an incorporation fee (everyone does), but Delaware's is reoccurring every year for companies that do not operate within the state. I think it was like $2-$300 a year. And then the big issue is if you get sued, it has to be taken care of in Delaware with a lawyer. You are not able to represent your company yourself in legal matters.
It just wasn't worth it, for the small ball I play its just easier to get incorporated in texas and then use a forwarding agent to keep your home address of the public records.
Stat Monitor Repairman said:
Delaware cuts both ways.
The argument for is that the law of Delaware with respect to corporations is settled and predictable which is the most important factor when you trying to make decisions for a large organization with shareholders that could be anywhere. The infrastructure is set up to deal with corporate law, and that's been their rice bowl for 200 years.
Some VC people want things incorporated in Delaware because they know exactly what they are dealing with.
But as we see with the Musk case and what's happened to Trump, the judiciary is increasingly politicized, which is an attack on both consistency and predictability.
So for a big time operation Delaware makes sense.
As of late, either north or south Dakota has made inroads in marketing themselves to keep beneficial owners anonymous particularly with regard to trusts.
Lots of beneficial ownership information is going to have to be disclosed under the new reporting guidelines which were just implemented under the Corporate Transparency Act. Those rules are going to apply regardless of which state you are incorporated in. Anonymity is going to be tough to achieve.Stat Monitor Repairman said:
Delaware cuts both ways.
The argument for is that the law of Delaware with respect to corporations is settled and predictable which is the most important factor when you trying to make decisions for a large organization with shareholders that could be anywhere. The infrastructure is set up to deal with corporate law, and that's been their rice bowl for 200 years.
Some VC people want things incorporated in Delaware because they know exactly what they are dealing with.
But as we see with the Musk case and what's happened to Trump, the judiciary is increasingly politicized, which is an attack on both consistency and predictability.
So for a big time operation Delaware makes sense.
As of late, either north or south Dakota has made inroads in marketing themselves to keep beneficial owners anonymous particularly with regard to trusts.
Very interesting. I wonder if the feds will require disclosure of trustees and beneficiaries if a trust owns the LLC/Inc.?2wealfth Man said:Lots of beneficial ownership information is going to have to be disclosed under the new reporting guidelines which were just implemented under the Corporate Transparency Act. Those rules are going to apply regardless of which state you are incorporated in. Anonymity is going to be tough to achieve.Stat Monitor Repairman said:
Delaware cuts both ways.
The argument for is that the law of Delaware with respect to corporations is settled and predictable which is the most important factor when you trying to make decisions for a large organization with shareholders that could be anywhere. The infrastructure is set up to deal with corporate law, and that's been their rice bowl for 200 years.
Some VC people want things incorporated in Delaware because they know exactly what they are dealing with.
But as we see with the Musk case and what's happened to Trump, the judiciary is increasingly politicized, which is an attack on both consistency and predictability.
So for a big time operation Delaware makes sense.
As of late, either north or south Dakota has made inroads in marketing themselves to keep beneficial owners anonymous particularly with regard to trusts.
https://www.nelsonmullins.com/insights/alerts/additional_nelson_mullins_alerts/all/u-s-corporate-transparency-act-beneficial-ownership-disclosure-obligations-take-effect
looks like that scenario would require disclosure (of the trustees)Jabin said:Very interesting. I wonder if the feds will require disclosure of trustees and beneficiaries if a trust owns the LLC/Inc.?2wealfth Man said:Lots of beneficial ownership information is going to have to be disclosed under the new reporting guidelines which were just implemented under the Corporate Transparency Act. Those rules are going to apply regardless of which state you are incorporated in. Anonymity is going to be tough to achieve.Stat Monitor Repairman said:
Delaware cuts both ways.
The argument for is that the law of Delaware with respect to corporations is settled and predictable which is the most important factor when you trying to make decisions for a large organization with shareholders that could be anywhere. The infrastructure is set up to deal with corporate law, and that's been their rice bowl for 200 years.
Some VC people want things incorporated in Delaware because they know exactly what they are dealing with.
But as we see with the Musk case and what's happened to Trump, the judiciary is increasingly politicized, which is an attack on both consistency and predictability.
So for a big time operation Delaware makes sense.
As of late, either north or south Dakota has made inroads in marketing themselves to keep beneficial owners anonymous particularly with regard to trusts.
https://www.nelsonmullins.com/insights/alerts/additional_nelson_mullins_alerts/all/u-s-corporate-transparency-act-beneficial-ownership-disclosure-obligations-take-effect
Expensive lawyers are going to be making lots of money figuring ways to get around the disclosure requirements, is my guess.2wealfth Man said:looks like that scenario would require disclosure (of the trustees)Jabin said:Very interesting. I wonder if the feds will require disclosure of trustees and beneficiaries if a trust owns the LLC/Inc.?2wealfth Man said:Lots of beneficial ownership information is going to have to be disclosed under the new reporting guidelines which were just implemented under the Corporate Transparency Act. Those rules are going to apply regardless of which state you are incorporated in. Anonymity is going to be tough to achieve.Stat Monitor Repairman said:
Delaware cuts both ways.
The argument for is that the law of Delaware with respect to corporations is settled and predictable which is the most important factor when you trying to make decisions for a large organization with shareholders that could be anywhere. The infrastructure is set up to deal with corporate law, and that's been their rice bowl for 200 years.
Some VC people want things incorporated in Delaware because they know exactly what they are dealing with.
But as we see with the Musk case and what's happened to Trump, the judiciary is increasingly politicized, which is an attack on both consistency and predictability.
So for a big time operation Delaware makes sense.
As of late, either north or south Dakota has made inroads in marketing themselves to keep beneficial owners anonymous particularly with regard to trusts.
https://www.nelsonmullins.com/insights/alerts/additional_nelson_mullins_alerts/all/u-s-corporate-transparency-act-beneficial-ownership-disclosure-obligations-take-effect
Quote:
The Corporate Transparency Act has been declared unconstitutional. On March 1, 2024, U.S. District Court Judge Liles C. Burke issued a 53-page opinion[1] granting summary judgment for the National Small Business Association and held that the Corporate Transparency Act "exceeds the Constitution's limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress' policy goals."
As a result, Judge Burke found the CTA to be unconstitutional because it exceeds the Constitution's limits on Congress' power, without even reaching a decision on whether it violates the First, Fourth, and Fifth Amendments. The Court then permanently enjoined the government from enforcing the CTA against the named plaintiffs and ordered a further hearing on the award of costs of litigation.
While it is likely that this litigation will continue to play out in the federal court system, the initial victory has gone to small business and importantly that means that compliance with this now unconstitutional regulatory regime can be set aside for the current time being.
