[rprasad]

If Cali-based, form an LLC in California. You derive no tax advantage from organizing an LLC out-of-state.

You cannot form an S-Corp if you have non-resident founders (anyone who is not a US citizen or permanent resident), which sounds like the case here. This is a strict legal requirement which cannot be avoided. They can hold ownership/equity in the company as long as its not an S-Corp.

As for how to become a Corp or LLC: - Go to the secretary of state website for the state you choose, then their Business Filings section - Download the Articles of Incorporation (for a Corp) or the Articles of Organization (for an LLC). - Fill the form out. - If any of your founders live in the state of incorporation/organization, just mail it in or drop it off at the local office for your secretary of state. OTHERWISE, find a registered agent in that state and pay them to do it for you. - Take care of the remaining corporate/LLC formalities: get an EIN from the IRS (free, takes about 5 minutes), and write up your Bylaws or Operating Agreement, have a company meeting.

Sorry about the late reply. For some reason, this showed up on my front page 12 days after your post.