Cost Drivers for Reincorporations

The useful part

Although there has been substantial discussion on differences in state corporate law driving incorporation choices, not as much attention has been paid to cost differentiation between the states. As many know, Delaware charges smaller public companies organized as corporations up to $200,000 annually. Carliss Chatman and I wrote a response to Professor Bainbridge's thoughtful DExit Drivers piece that was published in the Journal of Corporation Law.

How it works

• Our response, entitled DExit for Dollars, explores a complementary angle on the Delaware franchise tax and how it may be more material than previously appreciated for some smaller companies.
• Instead of focusing on the companies that have left Delaware to see what drove them—or at least what they put in the proxy, we consider the annual financial costs paid by companies that opt to remain.
• I also covered some of the cost considerations in a recent podcast with the Council of Institutional Investors.
• One of our main contributions is to suggest that companies should look at becoming subject to Delaware's annual franchise tax or escaping Delaware's a...

Details worth keeping

Large filers pay Delaware a flat $250,000 annually.