Originally published in Deal Lawyers, November -December 2011.

Corporate law in the United States is federalist in nature. Under this system, each state makes its own laws governing corporations and founders, in turn, select the jurisdiction’s laws that will govern the internal affairs of the corporation. In the resulting marketplace for incorporations, founders base their choice of jurisdiction on various legal and economic considerations, including the costs of incorporating and maintaining existence in any given jurisdiction, the scope of liability for directors and officers, the scope of stockholder protections, and the availability of takeover defenses. Founders might also weigh subjective considerations, including familiarity with a jurisdiction’s reputation, body of law, or court system.

Delaware has historically been the jurisdiction of choice for incorporation. Although varying arguments have been articulated over the years to explain Delaware’s preeminence, commentators generally point to several leading factors: Delaware’s well-developed body of case law, and the prestige and expertise of its judiciary. Delaware law, however, has become more complex over the course of recent decades and has trended toward greater director and officer accountability and increased protection of minority stockholders. Moreover, the cost of maintaining a Delaware corporation can be significant, depending on a corporation’s capital structure.

Nevada’s general corporate law is set forth in Chapter 78 of the Nevada Revised Statutes (“NRS”) and the laws governing mergers, exchanges, and conversions of business entities generally, including corporations, are set forth in NRS Chapter 92A. Nevada has modernized its business organizations law substantially over the past several decades in an effort to increase its competiveness as a place to do business and make it an attractive jurisdictional home to corporations, limited liability companies, and other forms of business organizations.

Please see full article below for more information.