Several states have become popular for starting companies, however, the best answer is almost always your home state. Why? It's simple...most people don't realize that you will need to file their company in their home state anyway, if they intend to do business there. So, related to your question, if you file your company is Deleware you will be considered a domestic company in Deleware and when you file in New York you will be considered a foreign company. The advantage is that your company is ruled under the laws of the state of Deleware and they are very business friendly. the downside is that you will need to maintain your LLC in two states, rather than one and this can become very expensive. If you are a large business that operates in several states anyway, it makes sense to pick the state that is the most business friendly to make your initial filing and then foreign file in the other states, but if you will not operate in the other state (Deleware) then you are paying additional costs for a very questionable return. A good attorney and/or an accountant may be able to help you with this decision or you could go to www.EZonlineFiling.com for more information. They have specialists in LLC filings who can help you understand more about how this works. Either way, good luck with your business...we need more people who are willing to step out of the corporate world and create their own way.

There was a recent entry on the New York Business Law blog (it's not mine -- I'm an Indiana attorney) entitled  "Why You Shouldn't Incorporate Your NY Business in Delaware or Nevada".   I don't think I'm permitted to insert a hyperlink, but I think I can use text to tell you it is at nylawblog.com.  The entry was on April 5 of this year.  Scroll down and you'll find it.  Obviously it is merely the opinion of one lawyer, so keep asking.