Texas Rising: Texas’ Rise as a Premier Domicile

While Delaware has long been regarded as the gold standard for corporate domiciles, boasting a well-established body of corporate law and a highly specialized Court of Chancery, the State of Texas has rapidly been working to close the gap.[1] This momentum has been sustained by the State’s statutory framework, practiced judicial restraint, and numerous socioeconomic incentives that come with operating in Texas.

Further, unlike many other states, Texas is without a state income tax. While property taxes in the State contribute to much of the tax landscape, companies are subject to a franchise tax that tends to be a lower burden than other traditional corporate income tax regimes.[2] This, coupled with robust economic-development grants offerings such as the Texas Enterprise Fund, which provides financial incentives to attract new business opportunities for firms, begins to tilt the financial calculus for companies even more in the direction of a Texas domicile.

The reasons for this trend extend beyond the commonly noted benefit of the State’s business-friendly approach.[3] The State of Texas offers a broad range of advantages that work to appeal to companies of all different sizes and considerations. A key factor is the State’s thoughtfully designed statutory framework, particularly, the Texas Business Organizations Code (TBOC). Among other things, the Code strikes an important balance between managerial flexibility and shareholder protections.[4] For instance, the TBOC permits a broadened approach to corporations’ and limited liability companies’ ability to tailor their corporate governance to the needs of the company via contractual arrangements, while offering more flexibility for modification and even elimination of certain fiduciary capacities in limited liability companies or partnerships (Sec. 21.401).[5]

The Texas Supreme Court’s commitment to its interpretation scheme and willingness to enforce contractual risk allocations, particularly in the oil, gas, and technology sectors, provides corporate planners the confidence of knowing what was negotiated will ultimately be respected. (See El Paso Field Services, L.P. v. MasTec North America;[6] URI, Inc. v. Kleberg County, (Tex. 2018);[7] Barrow-Shaver Resources Company v. Carrizo Oil & Gas, Inc., (Tex. June 28, 2019)).[8] Taken together, these decisions are examples of the Court reinforcing the expectation that parties will be bound to the terms of which they expressly agree to. This provides business the enhanced ability to operate and assess risk in the dealmaking market. In furtherance of this ethos, Texas has established business courts comprised of judges with commercial expertise created to resolve complex business disputes. These new Business Courts are designed to manage complex commercial matters more effectively, providing added predictability and confidence for parties engaging in business transactions. While still early in their operation (five of the 11 geographical divisions of the new Texas Business Courts are currently operational as of September 2025), the Texas Business Courts should further the State’s goal of fostering a more business-friendly jurisdiction.

Further, Texas’ extensive natural and territorial resources offer robust opportunity.[9] Importantly, Texas offers a talent ecosystem that supports sustained corporate growth. The State’s tier-one universities feed the engineering and business pipeline. The State’s metropolitan clusters foster a synergistic blend of legacy energy expertise. Add to this a relatively moderate cost of living, companies find it easier to attract and retain both executive leadership and skilled labor. The aggregate effect is a positive cycle promoting this trend toward Texas: Statutory flexibility begets governance certainty; judicial restraint enhances predictability; financial incentives optimize capital, and human capital ensures growth.

Texas continues its trajectory in establishing itself as a premier jurisdiction for companies looking to domicile. The State’s ongoing statutory innovation, establishment of specialized courts, and judicial predictability have worked to enhance its appeal to corporations looking to domicile. Texas’ many advantages make it a dynamic jurisdiction, positioning the Lone Star State as an emerging leader in American corporate governance.

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[1] NYT – New Texas Laws Open a Wild West for Corporate Governance, Niko Gallogly (August 16, 2025).

[2] Financial Times – How Corporate America Learnt Not to Mess With Texas (June 6, 2025).

[3] Id.

[4] NYT – New Texas Laws Open a Wild West for Corporate Governance – Niko Gallogly (August 16, 2025).

[5] Fiduciary Duties, Exculpation, And Indemnification In Texas Business Organizations – Elizabeth S. Miller (May 30, 2025).

[6] The Court held MasTec must bear the costs for undiscovered foreign crossing as expressly allocated in the contract.

[7] The Court enforced an agreement as written, declining to consider pre-contract negotiation language.

[8] The Court ruled that the absence of an express reasonableness standard required no reasonableness obligation.

[9] Financial Times – How Corporate America Learnt Not to Mess With Texas (June 6, 2025).

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.