Last month, Elon Musk announced that he would be moving Twitter’s headquarters from Delaware to Nevada. The move may be driven by the myriad litigation battles Musk has faced in Delaware.
Musk isn’t the only one trying to make the move from Delaware to Nevada. TripAdvisor is one of the latest companies trying to do the same. However, not everyone is happy about this. In late April, investors sued to stop TripAdvisor’s move in Delaware court, arguing that the company directors were acting in self-interest by moving to a state with “race to the bottom” laws that protect directors from shareholder lawsuits. Similar to Musk, TripAdvisor chairman Gregory Maffei, who is pushing the move to Nevada, has been the defendant in numerous lawsuits brought by shareholders.
Delaware Chancery Court now must rule if it will allow TripAdvisor’s move to the Silver State, and it puts the court in a tricky position, as blocking the move may be perceived as a power grab by the state of Delaware—which houses more than sixty percent of Fortune 500 companies according to Lawrence Hamermesh, a professor at Widner University Delaware Law School. At the same time, ruling in favor of the businesses moving to Nevada can be a blow to investors who will feel less protected in a state with more lax laws. Regardless of the decision, it will undoubtedly have an impact on Nevada and its perceived attractiveness by businesses.
So why is Nevada such an attractive spot for businesses like Twitter and TripAdvisor? Not only does it make sense for a west-coast based firm like Twitter to have its headquarters in the West instead of across the country, but Nevada has long tried to compete with Delaware as a business-friendly state. The state has intentionally created more relaxed corporate laws and offers further protections to corporate officers and directors.
In addition to the less stringent laws, companies like TripAdvisor argue that a move to Nevada means saving up to $250,000 a year in fees paid to Delaware. Nevada charges an annual business license fee of $500 and a filing fee of about $1,200, which is significantly less than many other states, including Delaware.
If you have any questions about starting a business in or moving a business to Nevada, feel free to contact us at 775-406-9595.