I along with 5 talented buddies are building an internet business. Some work in New York, Virginia, and New Jersey; I work in California. What state should we incorporate in?
When you are ready to be a major publicly held company, Delaware would be the state of incorporation of choice. Its corporate law is very well written and constantly updated; it has a capable judiciary that is used to dealing with corporate law cases and is relatively fast; and there are numerous court precedents. This gives management and investors and their counsel confidence.
Regardless of the state you choose, you would also be required to "qualify" to do business as a foreign corporation in every other state you have a presence. That means if you pick Delaware and qualify in California you'd be bearing some additional expense in Delaware (the modest filing fees and annual reporting) even though you won't have people there. So the answer is for the long term, Delaware.
But for the short term, you may pick California and change corporate domicile later. (You'd have to change your corporate documents later anyway to meet the needs of investors.) It's a question of saving a bit of money now or paying more later if you are successful.
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