How Delaware Became Incorporation Central

Bloomberg (h/t Ritholtz):

By 1900, New Jersey had grown so fat from corporate fees that several fiscally challenged states -- including Arizona, Delaware, Maine, South Dakota and West Virginia -- followed its example and began competing to charter as many corporations as possible. Some states competed by charging lower fees, others promised laxer regulations, and several offered both.
In 1913, New Jersey, fiscally secure (for the time being), destroyed its own chartering business when it passed antitrust measures urged by its lame-duck Democratic Governor Woodrow Wilson, who argued that the fast-growing state no longer needed the revenue that chartering provided.
Delaware emerged as the corporate favorite after 1913 because it adopted New Jersey’s well-understood and respected corporate law and legal precedents, minus the antitrust attitude. As an additional inducement, it offered the whole package at half of what New Jersey charged.
The other charter-hungry states failed to keep pace for several reasons. South Dakota offered the nation’s lowest chartering and franchise fees, but business executives feared its volatile political climate, which featured powerful populist, progressive and Democratic forces. Its courts sometimes engaged in what the local newspaper described as “corporation lynching” and its capital was a tiny town at the very end of the railroad line adjacent to a large Indian reservation.
West Virginia and Arizona were also distant destinations with reputations for violence and bad weather that rendered them unattractive to corporate executives and their attorneys, even if the need to visit was merely prospective.

At the time, South Dakota, West Virginia and Arizona corporations carried the reputation of being especially untrustworthy.  So Delaware won out because they weren't quite as dodgy.