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Warning: In general, you should incorporate in the state in which you’ll operate your business. The idea that, for example, non-Nevadan businesses can use a Nevada corporation to avoid paying taxes to the state where the business is actually located is an entrepreneurial myth. Any state in which you operate your S corporation may tax the S corporation... For example, if you operate your business in California but incorporate in Nevada, you won't avoid California income taxes. If you prepare your tax returns correctly, you'll still prepare returns for and pay taxes to California.