Never incorporate your company in the state of Delaware

https://twitter.com/elonmusk/status/1752455348106166598

by lopkeny12ko • 2 years ago

26 42 2 years ago

mc322• 2 years ago

Don't companies usually incorporate in Delaware because there is so much precedent for case law that it makes the business-law intersectionality more predictable than that in a state with less corporate case law?

It's not to say cases like this won't happen (obviously as evidenced by this) but it's still way more predictable than say Rhode Island or New Mexico.

rpmisms10• 2 years ago

Yes, and this is a strange decision for the Chancery court to make, since they enjoy being business-friendly and having a reputation for such. I'm not going to say the judge is biased, but...

Elon will likely take his own advice, and we'll probably see Texas offer incentives for companies to incorporate there in the near future.

numbsafari• 2 years ago

It’s only strange if you ignore everything except the name Elon Musk.

ibero• 2 years ago

How is it strange? I am unfamiliar with the chancery and precedent.

verdverm4• 2 years ago

Isn't Texas the state where most patent trolls sue from?

There's that one judge they have out there that is real favorable to the trolls iirc

maxerickson• 2 years ago

Why wouldn't the business friendly court side with shareholders?

Like if I were an prospective investor that he cared about, I would tell Elon to move his company from Texas to Delaware before I gave him like a quarter.

Kluggy2• 2 years ago

I don’t know there there’s been much precedent set anywhere for giving the CEO of a company 9.3% of the company’s market cap, devaluing everyone else.

kaliqt• 2 years ago

He did the impossible and made everyone rich, so Delaware shouldn't be getting involved at all.

breadwinner• 2 years ago

If total lawlessness is what you want, I don't think you can incorporate your company in any state in the US.

verdverm4• 2 years ago

There's a crypto company out there that will sell him a "legal" business formation on the blockchain

thfuran2• 2 years ago

If total lawlessness is what you want, why are you even trying to incorporate your company?

polygamous_bat• 2 years ago

Because otherwise when you sell stocks you get prosecuted by the SEC.

verdverm4• 2 years ago

I'll say my little company has been registered in Delaware for a long time. It's cheap and easy. Not sure what Elon's beef is. My guess would be a ruling he didn't like in their dedicated business legal system.

Edit, seems it was an unfavorable ruling, another top level comment has the details

forgot-im-old• 2 years ago

Let's remember Elon was not a founder of Tesla, just an early investor, and had no say in where it was registered.

pg_bot• 2 years ago

Context for those out of the loop.

https://www.cnbc.com/2024/01/30/tesla-shares-slide-after-jud...

user39393822• 2 years ago

What I don’t get about the incorporate in state X schemes, maybe someone can enlighten me, is that you still need to file a foreign corporation to operate in whatever state you’re in. So what exactly are you evading by filing in a different state?

verdverm4• 2 years ago

Delaware is a unique state because it has a dedicated business courts and a long history of litigation that makes understanding the likely outcome predictable

user39393822• 2 years ago

Right but whatever state you’re actually operating in still has jurisdiction, right?

rkagerer• 2 years ago

If any of us negotiated this good a deal we'd be saying "good on 'ya". If it really is unfair/illegal the board should be the ones to take the flack.

ChrisArchitect• 2 years ago

Never incorporate your company in the state of Delaware

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