When my co-founder and I started building the nderground social network we got close to incorporating a company and making a huge mistake.

The number one piece of advice we got is don't incorporate in California. The accountant we talked to said that once you incorporate in California it is difficult to ever extricate your company from California, even if you leave the state. The yearly filing and reporting costs are high for California entities.

If you feel that you have to incorporate, do it in Delaware. The initial and recurring costs are much lower than other states.

Don't let your initial enthusiasm for your startup get the better of you (as I mentioned, this almost happened to us).

Before you incorporate make sure that you actually have something to incorporate. Most startup ideas are not as good as the founders think and many startups fail before they need to incorporate. Unless you have succeeded in getting outside funding through a venture capital fund, you may not need to incorporate.

In short, you should only incorporate if you really need to do it. If you really have to incorporate do whatever you can to stay out of California.