U.S. State Filings & Registrations: Delaware vs California vs Texas LLC — What Entrepreneurs Must Know

When you decide to launch or expand a business in the U.S., the first truly strategic decision — often more important than product‑market fit — is which state to incorporate in. In 2025, according to the U.S. Census Bureau (BFS data), a typical monthly cohort of business applications is projected to yield about 28,500–29,000 new employer‑business formations within the next 12 months. Given that business‑formation activity remains historically high (business applications reached over 5.2 million in 2024), the state you choose — among 50 with differing laws, costs, and regulatory regimes — can materially affect your tax burden, compliance workload, growth potential, and even investor perception.

For entrepreneurs — including those based outside the U.S. — deciding among states like Delaware, California and Texas when forming an LLC can define your company's trajectory from day one. In this post we compare these three states head‑to‑head, weigh their strengths and trade‑offs, and help you align your choice with your business goals.

The Macro Trend — What 2024–2025 Data Tells Us

Even as the U.S. economy faces uncertainty, business‑formation activity remains robust. According to the Census Bureau's Business Formation Statistics (BFS), projected business formations for July 2025 (i.e. new employer‑businesses expected within four quarters of application) stood at 28,494, a 0.3% increase compared with June 2025. Meanwhile, the number of business‑application filings (EIN / tax‑ID applications) remains very high — 473,679 applications were filed in August 2025 alone.

Moreover, the overall flow of business applications has surged over the past few years. In 2024, the Census registered some 5.2 million business‑application filings nationwide, making 2024 one of the strongest years on record.

Behind these national numbers lies the enduring dominance of the Delaware corporate domicile. According to the Delaware Division of Corporations 2024 annual report, in 2024 there were 289,810 new business‑entity formations in Delaware — of which 72.9% were LLCs. In total, more than 2.1 million legal entities are incorporated in Delaware as of 2024.

Also noteworthy: Delaware remains home to a large share of the U.S. corporate elite — more than 66 percent of the companies in the Fortune 500 are incorporated there.

What does this imply for entrepreneurs — especially those based outside the U.S. or operating remotely? First: the pipeline of new LLCs and companies remains substantial, offering flexibility and opportunity. Second: because many entities are being incorporated, states are increasingly competing based on legal framework, cost, ease of formation, and ongoing compliance burden. For a foreign or non‑resident founder, choosing the "right" state for incorporation — considering both your present needs and future growth plans — can result in significant long‑term savings and reduce legal friction.

Delaware, California & Texas — State-by-State Analysis

Delaware: The Classic, Investor‑Friendly Choice

Delaware continues to thrive as the "go-to" state for many founders and investors. The state is widely respected for a robust and well-established legal framework under the Delaware General Corporation Law (DGCL), and the presence of the Delaware Court of Chancery — a non‑jury court expert in corporate law that provides predictable, business-savvy dispute resolution.

In terms of cost, forming an LLC typically involves a state filing fee (around US$90–$110 depending on the filing method) plus a flat annual franchise tax of US$300 for LLCs. A Registered Agent within Delaware is required if you do not have a physical U.S. address — but you do not need to reside in Delaware yourself.

For founders with ambitions to raise institutional capital, scale rapidly, or someday go public, Delaware remains the gold standard. Its legal consistency, investor familiarity, privacy features (members/managers need not be publicly listed), and global reputation make it a compelling base, especially for international entrepreneurs using services to handle registered-agent and compliance responsibilities.

However, it is worth noting that even Delaware's dominance is being questioned in 2025. Some high-profile public and private companies have begun reincorporating from Delaware to other states — signaling a broader reconsideration of Delaware's advantages.

California: High Market Access — at a Price

California appeals to many businesses because of its massive market, access to talent, vibrant tech ecosystem, and being physically close to customers or operations. But that access comes at a higher cost and heavier compliance burden.

The base cost to form an LLC in California is modest: around US$70 for Articles of Organization. The real pain point comes with recurring mandatory fees. All LLCs in California must pay a minimum annual franchise tax of US$800, regardless of revenue or profit. For many small or early-stage ventures — especially those without big revenue — this fixed cost represents a high overhead.

Furthermore, if you incorporated your LLC outside California (e.g., Delaware) but operate, have clients, employees, or significant activity in California, you are legally required to register as a "foreign LLC" in California, appoint a registered agent with a physical address there, and comply with state reporting requirements. That adds complexity, time, and cost. Many entrepreneurs underestimate this.

In short: California is often chosen for strategic business reasons — proximity, market size, operational need — but should be selected only if the benefits outweigh the recurring costs and added compliance. For low-revenue, remote, or globally-dispersed businesses, those costs may erode profitability quickly.

Texas: The Cost‑Efficient, Business‑Friendly New Challenger

Texas in 2025 has emerged as an increasingly attractive alternative for entrepreneurs. The state imposes a "franchise tax," but for most small and mid‑sized LLCs, the effective tax burden can be zero: as of 2024 onward the state's "no tax due" threshold for annual revenue is US$2.47 million.

Specifically, if your LLC's revenue stays below that threshold, you are not required to pay franchise tax — though you must file an annual Public Information Report (PIR) or Ownership Information Report by May 15 each year. Texas also does not levy personal state income tax, which can matter for members in certain structures.

Additionally, recent developments in 2025 have strengthened Texas's appeal. For example, businesses enjoy a relatively favorable regulatory climate, growing startup‑friendly infrastructure, and lower ongoing compliance costs compared to California — making Texas particularly attractive for remote, bootstrap, or lower‑revenue ventures.

For many small-to-medium operations, especially those run remotely or by non-resident founders — including those outside the U.S. — Texas offers a clean, cost-effective, and legally stable base without unnecessary overhead.

Case Study: Coinbase's Reincorporation from Delaware to Texas

A notable real-world example of the shifting state-preference trend is Coinbase, one of the largest cryptocurrency exchanges in the U.S., which in November 2025 filed to reincorporate from Delaware to Texas. According to its SEC filing, Coinbase cited a more favorable business climate in Texas, highlighting legislative updates that provided greater legal predictability and protection for management decisions under Texas corporate law. The company's Chief Legal Officer also mentioned concerns about unpredictability in Delaware's corporate-law environment, especially following several high-profile court rulings in the state. While Coinbase's operational footprint, stock listing, and capital structure remain unchanged, the decision to move its legal domicile underscores a broader strategic evaluation: prioritizing legal stability, cost-efficiency, and a business-friendly regulatory environment. For entrepreneurs, this case exemplifies that even large, high-profile firms are reconsidering Delaware as the default incorporation choice, validating the importance of selecting a state that aligns with a company's business model, risk tolerance, and long-term strategy.

Decision Scenarios — Which State Works for Your Business

What state should you choose? It depends on your vision. Here's how different business goals align with each state:

If your goal is to build a high‑growth, investor‑backed, potentially global-scale company, where future funding, acquisition or IPOs may matter — Delaware remains a top choice. Its legal sophistication, investor familiarity, and corporate governance framework make it a "safe harbor" for ambitious ventures.

If your business will be small, lean, remote, digital-first or bootstrapped, and you expect modest revenue initially — Texas often offers the best balance of cost, compliance, and flexibility.

If your business requires proximity to customers, operations, talent or a specific regional market (e.g., tech in Silicon Valley, manufacturing in California, or access to CA-based clients) — and you can absorb ongoing costs — California may make sense.

You should also consider trade‑offs carefully. For example, incorporating in Delaware but operating in California triggers foreign‑LLC registration costs and compliance burdens.

How to Make Your Decision — Practical Checklist (for Founders & Cross‑Border Entrepreneurs)

Use the following mental checklist when selecting the state for your LLC:

Do you expect to raise external capital, bring in investors, or scale significantly? If yes → Delaware is more suitable.
Is your business likely to operate mostly remotely, with modest revenue, and minimal U.S. physical presence? If yes → consider Texas.
Will you require access to local clients, talent, or operations in a state like California? If yes → California may be worth the cost.
Do you want to minimize recurring compliance and tax burden? Texas (or Delaware, depending on structure) tends to be more efficient than California.
Are you comfortable using a registered agent or third‑party service (especially if you are non‑resident)? This is often required for Delaware or Texas LLCs.

A Real‑World Shift: Why Some Companies Are Moving Out of Delaware

A growing number of firms — especially in tech and other litigation‑sensitive sectors — have begun realigning their corporate domicile away from Delaware toward states like Texas and Nevada. This reflects shifting priorities: lower costs, perceived legal environment changes, and a search for alternative business‑friendly jurisdictions. However, the majority of U.S. companies continue to use Delaware, and incorporation decisions remain complex and context‑dependent.

Conclusion: Take a Strategic, Not Default, Approach

Choosing where to form your U.S. LLC should not be a default decision — it deserves strategy, reflection, and alignment with your business model, growth ambitions, and operational footprint.

For bootstrapped or small‑scale ventures, Texas offers a low-cost, low-friction path. For growth-focused, investor-driven businesses, Delaware remains a tried-and-tested favorite. And for operations tied to California's market and talent ecosystem — California may justify its higher costs.