Why Should Delaware Care?
Delaware’s corporate franchise industry contributes about a third of the state’s multi-billion-dollar budget, allowing the state to offer a lower tax climate to residents. A spate of deincorporation moves to other states, started by billionaire Elon Musk, has raised concerns about the future of that industry, though.
Delaware’s top official overseeing the state’s corporate franchise industry had a simple message for the masses wringing their hands over whether the First State would remain the leading state for incorporation: Mellow out.
Secretary of State Charuni Patibanda-Sanchez detailed Delaware’s incorporation data during Monday’s hotly-watched meeting on financial projections – the first meeting since Gov. Matt Meyer dismissed a member of the state’s financial oversight board after he questioned a lack of data on the industry. She reported that all categories of entities saw increases.
In total, the state was home to more than 2.28 million entities at the end of 2025, or an increase of about 130,000 entities over the prior year. Those businesses will raise more than $2.1 billion in state revenue, or about $100 million more than 2024.
“I think that the general climate at the beginning of 2025 has really mellowed out over the last calendar year. Senate Bill 21 and just some marketing that we have been doing pretty much from day one of this administration has really helped to settle everyone’s potential anxiety or unease about Delaware,” Patibanda-Sanchez told the members of the panel known best by its acronym, DEFAC.
Calling out the critics
The early release of the detailed data – it isn’t typically shared until the Division of Corporations’s annual report is published – may help to assuage lingering concerns by state legislators, business leaders and the public.
A collection of taxes and fees on the industry that handles legal and regulatory filings for corporate America feeds more than $2 billion to the state budget, or about a third of all revenue. That funding has long been cited as the reason Delaware can continue to not impose a sales tax and keep other taxes low compared to neighboring states.
But a constant drip of proxy statements from companies seeking shareholder approval to move their incorporations – often to competing states like Nevada or Texas – has made the Meyer administration’s task of changing the narrative more difficult.
While they began with celebrity billionaire Elon Musk’s companies Tesla and SpaceX – after he lost a lucrative contract dispute in state courts – those ranks have grown to include others like Dell, Coinbase, and Dropbox, among others.
A Newsmax headline touting the $3 trillion combined market value of those departing companies was widely shared in conservative circles and promoted by the Delaware Republican Party. The story did not interview anyone from the state, nor disclose that Newsmax’s parent company had been among those reincorporating.
Market values don’t factor into Delaware’s incorporation industry, however, which caps annual payments at $250,000 for the largest corporations.
Patibanda-Sanchez, who has spent much of the last year attending legal and industry conferences around the country to discuss the benefits of incorporating in Delaware, called out those flawed criticisms in her comments.
“Conjecture, misinformation, and exaggeration must never be part of any discussion regarding the franchise,” she said. “The impact those types of statements have can ripple far beyond this room.”
Newly created corporations or those moving to Delaware do not create the same headlines, but the new data showed the number of those largest entities grew by more than 24,000 last year. They will contribute an additional $13.6 million over the prior fiscal year, or an increase of about 1%.
Officials seek more insights
A slight decrease in the percentage of initial public offerings (IPOs), or companies listing on the stock market for the first time, choosing to incorporate in Delaware last year raised some questions from DEFAC members.
Patibanda-Sanchez replied that the Division of Corporations was watching those numbers and meeting with advisory law firms to discuss the state franchise. However, she noted that the vast majority of IPOs that did not come to Delaware ended up incorporating internationally, particularly in Caribbean countries, rather than other U.S. states.
“We are still the No. 1 choice for venture capital,” she added. “The forms that venture capital rely upon still require Delaware law.”
The slow rate of growth in the state’s franchise tax – the annual fee that allows corporations to keep their domicile in Delaware and powers the industry’s budget impact – also raised some questions.
Rick Geisenberger, a former Delaware finance secretary who spoke during public comment, said it was “totally unprecedented to have back-to-back, essentially flat revenue growth when domestic equity markets are as strong as they’ve been the last two years.”
“I’m glad this body is asking probing and perhaps even uncomfortable questions, and that the Secretary is studying the drivers,” Geisenberger said. “Those answers are going to be critical in understanding the underlying causes and what the state can and should do on all matters of important public policy considerations, not just with respect to our corporate laws, but also whether it is prudent to increase Delaware’s reliance on a closely related revenue source, unclaimed property.”
Money from unclaimed property – derived from a range of different sources like dormant bank accounts, security deposits, utility refunds, uncashed stock dividends, unspent gift cards, and more – adds nearly $400 million to state coffers annually. But it has been under the microscope, following a loss for one revenue source in a U.S. Supreme Court case in 2023.
On Monday, the DEFAC board also approved the latest projections for the upcoming fiscal year, which added $196 million in funding largely on the back of higher than expected personal income tax returns. That pushes the annual appropriation limit for the state budget that will begin July 1 to $7.3 billion, easing any concerns of revenue declines this year.
