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.