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Disclaimer: I'm not a lawyer and I don't play one on TV.

First, check with the state you reside in. You may still have to report income earned in that state to the state.

Secondly, if you have a foreign corporation, you are usually required to register it with the state that you conduct your primary business in. Often times this requires a 'Certificate of Good Standing' from the state where you are incorporated which costs money.

Third, if you incorporate in another state, you must have a resident agent in that state to maintain a business presence, forward paperwork, etc. Sometimes the cost of the foreign corporation, certificate of good standing, resident agent, annual filing fees, etc outweighs the tax benefits that you receive.

However, you would be best served to spend a hundred dollars or so and talk with an accountant. When you call looking for accountants, be direct so that you don't waste your time.

Hi, my name is ___, I deal with completely legal adult sites and am in need of some accounting help. Do you have a problem with this?

If they say no, then say: I need an aggressive accountant, how will you help me reduce my tax liability? If they try and skirt this issue, move on.

After about 15 calls, you'll find two or three that might meet your needs. Meet with them, interview them, find one you're happy with.

Having a good accountant is worth its weight in gold. Same with having a good attorney.

Don't hide things from them -- they are the guys that will protect you when you need it most. You don't want to surprise them when you need them.