[thinkcomp]

Assuming you're in the United States, this is really only an issue on a state-by-state basis. To avoid paying duplicate corporate franchise tax and registered agent fees, you should just incorporate in the state where you are physically located. However, if you have other considerations (like raising funding), this may not work.

Depending on the state you incorporate in and the number of shares outstanding you have, there may be fees on a per-share basis that you should check into.

Payroll taxes vary from place to place, but there's not much you can do about it--you have to pay them for the state where you're located. California currently has four types of payroll taxes: income tax withholding, unemployment insurance, the employment training tax (ETT) and state disability insurance (SDI). (See http://www.edd.ca.gov/payroll_taxes/rates_and_withholding.ht...) You can deduct SDI you've paid for the year on your 1040.

The type of corporation matters, too. The California corporate franchise tax rate for S corporations is 1.5%. For C corporations it's 8.84%. This only matters for startups that actually are bringing in revenue--otherwise you just have to pay the $800 minimum--but if you are actually making money it's a pretty big difference.

I'm not a CPA, just for the record.

[minouye]

Very good info and relevant to LLCs as well (the franchise tax also applies to LLCs). This means that even if you only make a dollar in revenue, you'll be paying at least $800 to the great state of California each year. For smaller operations, California is killer.

[prodigal_erik]

The trigger is having existed for a year, not the first dollar of revenue. http://www.taxes.ca.gov/corps.shtml

[minouye]

Correct--I should have clarified that one dollar is just there for context.