The move to move LLC from California to Delaware was a strategic response to a proposed California “billionaire tax” and reflects common founder priorities: tax exposure, legal predictability, and privacy. This article explains the facts, the trade‑offs, and practical steps international entrepreneurs and digital nomads should weigh.
What Happened and Why it Matters
In late December 2025, an entity linked to Google co‑founders converted out of California into a Delaware LLC, reportedly changing its name to T‑Rex Holdings on December 24, 2025. The timing coincided with a proposed one‑time 5% wealth tax aimed at ultra‑high‑net‑worth California residents, a measure that would apply retroactively to residents as of January 1, 2026. These developments prompted high‑profile founders and family offices to reassess state ties and corporate registrations.
Quick comparison: California vs Delaware for LLCs
| Attribute | California | Delaware |
|---|---|---|
| State tax risk | High for residents; proposed wealth tax concerns | No state wealth tax; business‑friendly tax code |
| Corporate law predictability | Less specialized chancery court | Specialized Court of Chancery; predictable case law |
| Privacy | Public filings may list managers | Greater flexibility for nominee/manager structures |
| Investor perception | Local ecosystem benefits | Preferred by VCs and institutional investors |
Practical steps to consider
- Confirm personal tax residency first. Changing an LLC’s state of formation is not the same as changing where you pay personal taxes. Residency rules (days present, domicile, intent) determine personal tax exposure.
- Choose the right mechanism. Options include domestication (redomiciliation), forming a new Delaware LLC and merging, or dissolving and re‑forming. Each has different legal and tax consequences.
- Document timing and intent. For any move near a retroactive tax trigger, keep clear records showing when corporate changes occurred and why.
- Consult cross‑border counsel. International entrepreneurs and digital nomads face additional residency and treaty issues; get both state and federal tax advice.
What Entrepreneurs Should Take Away From This
Moving an LLC from California to Delaware can reduce certain state‑level legal and administrative frictions, but it does not automatically change personal tax residency or eliminate exposure to retroactive measures if you remain a California tax resident. Delaware’s advantages—including established corporate case law, investor familiarity, and flexible governance—are often the primary drivers for such redomiciliations.
Moving an LLC from California to Delaware can deliver legal predictability and investor‑friendly governance, while tax outcomes depend primarily on personal residency and nexus, not just the LLC’s state of formation. Below is a focused, practical guide that separates the tax considerations from the legal steps, with clear trade‑offs for international entrepreneurs and digital nomads.
Tax Considerations (What Determines Your Tax Exposure)
- Personal residency matters most. State taxes and retroactive wealth measures apply to individuals based on domicile and presence, so changing an LLC’s formation state does not automatically change where founders pay personal tax.
- Entity tax vs. owner tax. Delaware can be attractive because it has a business‑friendly tax code and no state wealth tax for non‑residents, but if the LLC conducts business or has employees in California, California nexus rules can still trigger franchise or income tax obligations.
- Timing and documentation are critical. If a move is near a proposed tax trigger (e.g., a state wealth tax), keep contemporaneous records showing when corporate actions occurred and the business rationale for the change.
- International issues. Digital nomads must also consider home‑country tax residency, treaty rules, and potential exit taxes; coordinate state, federal, and international tax advice before acting.
Legal Steps (How to Change an LLC’s State)
- Choose the mechanism. Common options are domestication (statutory conversion), forming a new Delaware LLC and merging, or dissolving the California LLC and re‑forming in Delaware. Delaware’s conversion statute streamlines redomiciliation when allowed by both states’ laws.
- Member approvals and filings. Most conversions require member approval and filings with both California and Delaware secretaries of state, plus a Certificate of Conversion and Certificate of Formation in Delaware.
- Operational updates. Update contracts, bank accounts, vendor records, payroll registrations, and local business licenses; you may need a new EIN depending on the structure change.
- Ongoing compliance. Maintain a registered agent in Delaware and, if you still operate in California, keep a registered agent and file required California returns and franchise tax reports.
| Decision area | Tax focus | Legal focus |
|---|---|---|
| Primary driver | Personal residency; nexus; state tax rules | Corporate governance; investor expectations; case law predictability |
| Immediate effect | Limited on personal taxes | Changes entity law and governing documents |
| Typical cost | Potential state audits, exit taxes | Filing fees, legal and accounting fees |
| Time sensitivity | High if retroactive tax proposals exist | Moderate; depends on approval and filings |
Risks, Trade‑offs, and Next Steps
- Risk of audit or residency challenge if ties to California remain strong; expect scrutiny on travel, property, and family ties.
- Operational complexity from multi‑state filings and potential duplicate compliance costs.
- Investor signal: Delaware often improves investor confidence, but it’s not a tax panacea.
Actionable next steps: Confirm personal residency status, consult a cross‑border tax advisor, and decide whether domestication or new formation + merger best fits your governance and tax goals.
Capital flight is a predictable outcome to tax hikes. We saw it in Norway, Sweden, and continue to see it in California and New York. If you feel the need to flee your current tax residence for more favorable economic conditions and regulations, click here to sign up for GWP Insiders to get more information on how to get things started.
