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The quick answer is  -  usually in your own home state.  Why?  It's simple - cost.  The cost to incorporate as you'll see is usually only several hundred dollars including state fees.  However, if you incorporate in a state other than your own and do business in your own state, you must then "qualify" or file for authority to do business in your home state.

Why?  Remember that a corporation is an artifical legal entity which can do almost anything a person can do, such as enter into contracts, open a business, own real property, etc.  Each state has a valid interest in protecting their citizens.   This is one of the reasons why you are required to appoint a registered agent when you incorporate - to ensure that there is a valid address where a state's citizens can serve process if they are harmed and need to take legal action.   A state needs the same assurance from a corporation formed out of state.  It needs to know that the entity was properly formed  (the state may require a "Certificate of Good Standing" from the home jurisdiction) and who the registered agent is.  This information is disclosed in your Application for Authority to Do Business (usually called the "qualification" process.)

Bottom line - if you incorporate in a state other than your home state, it will cost you an extra few hundred dollars because you'll then have to qualify in your home state (assuming you do business there.)  Of course, the extra few hundred may not mean much to you or you may have a strategic reason for choosing to incorporate in a particular state.

For example, certain states, such as Delaware, or Nevada require less information about the founders of a corporation than other states and the added privacy may be important to you.  Delaware (more than 50% of the Fortune 500 are incorporated in Delaware) is attractive for other reasons as well.  Delaware has an extremely well established body of law, does not seek to tax income earned in other jurisdictions, has an excellent, informed business court in its Court of Chancery and is very pro-business.  For all these reasons, Delaware corporations are a known commodity in business circles (particularly banking) and are always well received.  Among the other most popular jurisdictions for formation are Florida, New York, New Jersey, and California.

Remember that, as an affiliate of National Registered Agents, Inc., we have a nationwide presence with affiliates in each of the 50 states and internationally.   This enables us to create your entity anywhere from Alabama to Alaska in the shortest time frame possible.