So seeing all these problems, how are YC companies solving them or better yet how do they handle the whole process to avoid this? PG said they are incorporating in Delaware but their offices most probably are in CA. Shouldn't this be a problem being in different states? Or it applies only to foreign related companies? Thanks.
It's pretty common to incorporate in Delaware even if you have little or no physical nexus there, for a variety of reasons: http://www.newsworks.org/index.php/local/brandywine-to-broad.... This probably applies more to large companies though. I imagine there's some overhead relative to incorporating locally if you're a small business.
What constitutes a physical nexus can be a bit hard to define at the margins. (See e.g. Amazon's fights with a number of states.) But it usually means you're selling something there as opposed to just having employees. A physical nexus usually just relates to collecting sales taxes though. I've never heard of having to incorporate in additional states although maybe that's sometimes the case.
(I know that the small NH company I used to work for certainly didn't incorporate in additional states when they hired non-NH residents. They DID have to handle state withholding on payroll but that sort of thing is handled pretty transparently by payroll processing companies like ADP.)
