The first question is not what state, but what type of entity. If you plan on seeking funding from venture capitalists (VCs) and / or angel investors or if you think an initial public offering (IPO) is possible then you should set up a C-Corp. If you don’t anticipate those events then something flexible like an LLC is likely the best route. Now comes the question – in what state? If it’s a C-Corp then Delaware is the most common choice because VCs and angels prefer DE (among other things). If you form an LLC then it comes down to a variety of considerations, such as annual taxes & fees and where you conduct business from / in.
If you want to speak with an attorney about this big decision then stop by. Our (I’m the CEO) legal marketplace is easy to maneuver and affordable for all companies, not just the funded ones. We offer free initial consultations as well as no obligation price quotes. Good luck!