TEXAS BUSINESS LAW
Texas vs Delaware: Where to Form Your Startup in 2026
Form your startup in Texas unless you are raising institutional venture capital. For a business that lives and operates in Texas, a Texas LLC or corporation costs a one-time $300 filing fee, owes no franchise tax until annualized revenue passes $2.65 million (the 2026 no-tax-due threshold), and never needs a second state’s paperwork. A Delaware entity running its business from Texas pays Delaware’s annual franchise tax, a Delaware registered agent, and a $750 Texas foreign registration on top — roughly double the compliance burden for a benefit most startups never use.
This guide compares the 2026 numbers, the two court systems, and the one situation where Delaware genuinely earns its price.
What Formation and Upkeep Cost in 2026
Formation cost is the filing fee you pay once; upkeep is what each state charges every year you exist. Here is how the two states compare for a typical startup:
| Cost item | Texas | Delaware |
|---|---|---|
| Formation filing fee | $300 flat (LLC or for-profit corporation) | $110 for an LLC; $109 minimum for a corporation, scaling with authorized shares |
| Annual franchise tax | $0 if annualized revenue is at or below $2.65 million (2026–2027 report years); 0.375%–0.75% of taxable margin above that | LLC: $300 flat, due June 1; corporation: $175 minimum (up to $200,000; $250,000 for large filers), due March 1 |
| Annual report | Public Information Report — no fee | Corporations file an annual report with a $50 fee |
| Registered agent | Any Texas resident or business with a Texas street address — often costs nothing | Delaware agent required; commercial agents typically run $100–$300 per year |
| Operating from Texas | Nothing extra | Add a $750 Texas foreign registration plus ongoing Texas franchise tax filings |
Two details worth knowing on the Delaware side. First, a corporation’s filing fee and franchise tax both scale with authorized shares — and Delaware’s default tax bill uses the authorized-shares method, which can show a five-figure number for a startup that authorized millions of shares. Recalculating under the assumed par value capital method usually drops a pre-revenue startup to the $400 minimum for that method, but you have to know to do it. Second, missing Delaware’s deadlines costs a $200 penalty plus interest, and a delinquent Delaware entity loses good standing — which surfaces at the worst time, like financing diligence.
On the Texas side, the franchise tax is a margin tax on revenue, not an income tax, and Texas has no personal or corporate income tax. Since the 2024 report year, entities under the no-tax-due threshold no longer file a No Tax Due Report at all — just the information report.
The Double-Registration Trap
A Delaware entity doing business in Texas must also register with the Texas Secretary of State as a foreign entity — there is no way around it. The application costs $750 (versus $300 to just be a Texas entity), and registering does not replace your Delaware obligations; it adds Texas ones. From then on you maintain two states’ filings, two registered agents, and a Texas franchise tax account, while still paying Delaware’s annual franchise tax. Operating unregistered is worse: Texas can bar your entity from suing in Texas courts and assess late fees for each year you should have been registered. See our guide to foreign entity registration in Texas for the mechanics.
For a bootstrapped or revenue-funded startup, this trap is the whole ballgame: Delaware’s advantages are litigation- and investor-facing, but the double bill arrives every year whether or not you ever raise a round or see a courtroom.
Court of Chancery vs the Texas Business Court
Delaware’s Court of Chancery is the traditional reason sophisticated parties chose Delaware: a dedicated equity court deciding corporate disputes without juries, staffed by judges who do nothing but this work, sitting on top of two centuries of precedent interpreting the Delaware General Corporation Law (DGCL). That predictability is real and valuable.
Texas has now built its answer. The Texas Business Court opened September 1, 2024, with divisions in the state’s major metro areas and judges drawn from complex commercial practice. In 2025 the Legislature expanded it significantly:
| Feature | Delaware Court of Chancery | Texas Business Court |
|---|---|---|
| Track record | Operating since 1792; deepest corporate case law in the country | Opened September 1, 2024; precedent still developing |
| Core jurisdiction | Equity disputes, internal affairs of Delaware entities | Governance disputes, qualified transactions, and commercial cases — generally $5 million+ in controversy after HB 40 (effective September 1, 2025), plus IP and trade-secret claims |
| Juries | None | Available where constitutionally required |
| Governing statute | DGCL | Texas Business Organizations Code, including SB 29 (2025), which codified the business judgment rule |
Texas is openly courting companies reconsidering Delaware. The 2025 reforms — a lowered $5 million amount-in-controversy threshold for most Business Court cases, statutory protection for director decisions, and limits on shareholder litigation — were passed precisely to give businesses Chancery-style certainty under Texas law. The honest comparison in 2026: Delaware still has the deeper case law; Texas has closed much of the structural gap and is cheaper to live in.
When Delaware Genuinely Makes Sense
Delaware is the right choice when you are building toward institutional venture capital. Most VC funds expect — and many effectively require — a Delaware C-corporation before they wire money. Their lawyers know the DGCL, the standard financing documents assume it, and stock option plans, preferred stock terms, and exit mechanics all run on Delaware rails. If a priced round is realistically on your roadmap, forming in Delaware from day one avoids a conversion later (conversions are routine but cost legal fees and add diligence friction).
Outside that scenario — a services firm, a franchise operation, a company funded by revenue or local investors — Delaware is an expense, not an asset. And if circumstances change, both states allow conversion: a Texas entity can become a Delaware corporation before a funding round, and a Delaware entity can redomesticate to Texas.
Frequently Asked Questions
Is Delaware cheaper than Texas for an LLC?
Only at the moment of filing ($110 vs $300). Delaware then charges $300 every year; Texas charges most small businesses nothing annually. A Texas-based Delaware LLC also owes the $750 Texas foreign registration, so Texas wins on cost in year one and every year after.
Does a Delaware entity save a Texas business any tax?
No. Delaware not taxing out-of-state income doesn’t help you, because Texas has no income tax either — and the Texas franchise tax applies to any entity doing business in Texas regardless of where it was formed. A Delaware entity just adds Delaware’s franchise tax on top.
Do investors still insist on Delaware?
For institutional venture rounds, generally yes — the Delaware C-corp remains the default vehicle. Angel and friends-and-family investors usually don’t care, and Texas’s 2025 corporate-law reforms are aimed at changing the default over time.
Can I move my Delaware company to Texas later?
Yes. Both states permit statutory conversion, so an entity can change its home state without dissolving and reforming. It requires filings in both states and updated agreements, which is why picking the right state at formation is cheaper.
Reidel Law Firm forms Texas LLCs and corporations and advises startups on Texas business law — all on flat fees quoted upfront, so you know the full cost before we start. Contact us to get your entity formed right the first time.
