House Bill 400 and Delaware’s Economic Future
By: Kathleen Rutherford, Guest Contributor
Most people don’t think about where companies are incorporated—but it actually matters a lot for Delaware’s economy and everyday life in the state.
For decades, Delaware has been the go-to place for businesses to legally “set up shop,” even if they operate somewhere else. That system brings in a major source of revenue for the state through corporate fees and taxes. That money helps fund things like schools, public safety, and other services people rely on every day.
But that advantage isn’t guaranteed forever.
Recent data shows Delaware’s share of new corporate incorporations is starting to slip—from over 80% in recent years down to about 75% in early 2025. That might not sound like a big change, but in the business world, even small shifts matter. Companies pay close attention to cost, stability, and whether they can find better options elsewhere.
At the same time, other states like Texas and Arizona are actively trying to attract businesses away from Delaware by offering lower costs and simpler rules. That means Delaware is now in more direct competition than ever before.
This is where House Bill 400 comes in. The bill raises fees on LLCs and other business entities. Supporters may see it as a way to bring in more money for the state. But there’s another side to it: if it becomes more expensive to stay in Delaware, some businesses may decide it’s not worth it anymore.
It’s also important to remember that Delaware already has one of the highest corporate tax burdens in the country. In that context, increasing fees even further risks making the state less competitive at exactly the moment when other states are actively lowering costs to attract the same businesses. Instead of strengthening Delaware’s position, it could unintentionally push companies to incorporate elsewhere.
And when businesses leave, the impact doesn’t stay on paper—it shows up in real life.
Many jobs in Wilmington and across Delaware are tied to the state’s corporate system, even if people don’t realize it. Some estimates suggest that a significant share of local employment is connected in some way to this industry. If fewer companies choose Delaware, that could eventually mean fewer jobs, less economic activity, and less revenue flowing into the state.
There’s also a bigger concern: Delaware depends heavily on business-related revenue to fund its state budget. If that revenue shrinks because companies start leaving, the state has to make up the difference somewhere. That often leads to tough choices like higher taxes for residents or cuts to important services.
This is why the issue isn’t just about business policy—it’s about long-term stability for everyone who lives here.
Delaware has built a strong reputation over many years as a reliable, business-friendly state. That reputation didn’t happen by accident—it came from consistency and a system that companies trust. Once that trust starts to weaken, it can be hard to get back.
HB 400 may seem like a small policy change, but in a competitive national environment, small changes can have big consequences. The concern is that instead of strengthening Delaware’s position, it could slowly push more companies to look elsewhere—taking jobs and revenue with them.
At the end of the day, the question isn’t just whether the state collects a little more money today. It’s whether Delaware risks losing a system that has supported its economy for decades.
Kathleen Rutherford is a government relations and advocacy professional with experience in lobbying, public policy, and strategic communications in Delaware and Washington, D.C. Rutherford Consulting, Inc. provides policy analysis, advocacy strategy, and communications support that connects legislative decisions to real-world economic and community impacts.