Create Offshore or local?

Being in the Internet age and all, and only buying and delivering services through the Internet:

1. Should I create a company local to where I live or in some offshore business friendly location?
2. And what offshore locations are not only business friendly but Internet startup friendly? (in the sense that they have lower fees, and little red tape).

There've been numerous discussions about this here, but I'll dare to repeat myself - you'll save nothing by incorporating outside of your state, if you're in the US.

Here are some questions on this issue that you might find related: One, Two (read the discussion in the comments), Three.

I'll summarize it again:

It is my opinion (I'm not a tax professional or a lawyer, so I can't provide a legal/tax advice) that since you live in the US (specifically in California), you'll have to register your business where you live (regardless of where else it is registered). All the states in the US require business operating on their soil to be locally registered (either as a local business or a foreign business operating locally).

Having employees/active participant partners establishes "nexus" in California (i.e.: you're operating locally).

Thus, by establishing off-shore you're not saving any California red-tape (and there's plenty of it, I live in California myself), you'll just be adding some more "off-shore" red tape.

Take into account that both California and the US government tax income from all sources - that includes foreign sources. So no taxes saved.

Federal law is very aggressive towards foreign investments and incorporation. You'll have to file some additional forms, and your taxes may be calculated differently and not to the best.

Bottom line: discuss all your options with a CA-licensed CPA and attorney, to make sure you understand all the pitfalls.