What to start a business in Delaware completely online but I live in California. Would I still pay California taxes?

The advantages of registering your business in Delaware rather than California is not easily answered since you have not even decided on the type of business entity you are creating. This is really a complicated business decision that depends on more than just the type of taxes you pay. I really suggest if you are serious, that you spend a few minutes with a business attorney to provide you with advice specific to your situation.

I agree with Mr. Wilson. Where income taxes and sales taxes are due can be different than the state in which an entity is formed.

I agree with my colleagues, but suspect no benefit to Delaware incorporation. You ay not need to incorporate at all. Frankly, your best investment at this point is a CPA.

If you form a business entity (e.g., a corporation or a LLC) in another state other than California, such as Delaware, you will generally have to register that entity as a foreign entity with the California Secretary of State and will then be subject to California taxes, which includes a minimum annual tax of $800 even if the entity is not profitable. In addition, you will likely have to pay some minimum annual amount to maintain an agent for service address in whichever state you formed the entity, which might only be about $100 per year or so. By in large for a business you've proposed, there is not much to gain to forming the entity in Delaware versus just forming the entity in California. Note, because you live in California, your principal place of business will be in California and because you're likely to have at least a few California customers/clients, there is likely a sufficient nexus for California to bring your business entity within California's regulatory infrastructure, including being taxed.

Typically, the state of incorporation will have little impact on state level taxation. The question is where are you conducting business and earning revenue? Online businesses have the ability to do business in every state, so the analysis is complicated. Some states also tax internet sales and services. Any tax issue should be evaluated by a CPA or tax attorney, but it won't drive the choice for your state of incorporation. Other issues such as the level of privacy afforded to your corporate records can vary from state to state.

If you are going to start a web based business there are many items you need to discuss with an attorney besides what your business entity would be. I have written a legal guide for this site with a list of issues you should discuss with an attorney. I have placed a link below to this guide for your convenience. You will want to discuss your situation with a lawyer in more detail. Most lawyers on offer a free phone consultation.