When I dug into this when I was setting up, my understanding was that, in Delaware, there is established case law dealing with multiple shareholders that investors really like. But in Nevada, privacy laws are supposedly stronger (I believe they don't share corporate info with the IRS) and it is advertised that Nevada courts are less likely to pierce the corporate veil. A recent googling just turned up this counter-argument to that (http://www.youngentrepreneur.com/forum/f2-general-business/d...) so YMMV.

I believe the costs are pretty comparable if you're an out-of-stater: You'll get hit with annual registration fees (slightly higher in Nevada, I believe) and the need for a registered agent in either location, but you'll get hit with a franchise tax in Delaware (not sure if it offsets the Nevada registration fee off the top of my head). Either way, if you're not operating in Nevada or Delaware, the state in which your business is operating is going to want taxes, so it doesn't really help in that regard. (And, as an aside, if you're in California, taxes really suck).

IIRC, Nevada is pretty light on state taxation.

Quick look at Wikipedia notes that there are no personal or corporate state taxes.

If you resides in California, don't you still need to pay CA business taxes?

Unfortunately, one of the downsides of CA is the $800 annual franchise tax =[. Can't get around it even if you incorporate somewhere else.

Good news is, if you're an Inc you can waive the first year. LLCs can't though.

Yes

If you're doing biz in CA, I'm pretty sure that CA still collects corporate income tax. (I forget if CA still has a unitary corporate tax, but it definitely wants taxes on in-state profits.)