LLC Incorporation - Implications when selling software online?

Your primary question ("what are the key considerations") is really broad, because there aren't any special considerations that differ from selling other products online.

So, to adress your other questions...

Will I still have to register as a foreign business?

Why? You aren't selling software in other states. You are selling software in your state, and people from other states come to you (via your website) to buy it.

Are there any special requirements given that each member is living/working in a different state?

Not really. Pick a state and incorporate. Probably the state of who ever is the majority holder. You'd probably be wise to ellect for S-corp tax filings, since it will make it much easier when it comes to tax time.

If we decide to incorporate in "business friendly" states such as Nevada or Delaware what are the consequences if no one lives in-state?

This is a completely different topic that isn't very relavent to your question.

Since we each live in a different state, does that mean we are operating in 3 different states? If so, do we need to form an LLC or register in each state?

Probably not. Your actual operations will be in only one state, but owners will reside in different states. That's not too uncommon.

We've had difficulty finding websites with specific information around LLCs and forming an online software company. Can anyone help point us in the right direction?

Don't think online software company... just think online company.

I'll reiterate Jason's point and suggest that you invest in professional advise. The problem is not that you won't be able to answers to your questions, it's that you don't know what questions to ask. That's pretty clear to me based on the questions you have asked.

One of the biggest concerns I'd have is in the membership agreement: what if you are sucessful in your venture and your partners want to go a different way with things than you do. Yeah, it's all "we'll totally agree on everything" now, but this will come back to bite you hard later. What then? This is one of the very many reasons getting professional advise is a prudent idea.

So this time some specific answers as I understand them ... of course none of this is legal advice. These are just my layman's observations. Seriously, asking for legal advice from non-lawyers for free is probably worth every penny you pay for it :)

1. Yes, you'll have to register as a foreign LLC in your own state, if you form the LLC in one of the usual states like Delaware. It doesn't matter if you have a storefront or not.
2. I think it depends on the sort of work people are doing. What matters is whether the work creates a nexus in those states. If you have one place where the majority of the work takes place and where you do the work of selling, then you probably have a nexus in that state.
3. There are no consequences. The point of Delaware and Nevada's business-friendly laws is that you don't have to physically be there :)
4. You would never need to form an LLC in more than one state. You might want to register the LLC as a foreign LLC in each of the states though.
5. In addition to the sites noted above, try http://www.nolo.com/ for this kind of legal information.

I would recommend getting the advice of a lawyer and accountant. The cost can seem prohibitive, but many firms are willing to either defer or reduce their fees for a startup. I formed an LLC this summer and it cost $700 in attorney fees and $300 in tax advice. I spent a lot of time researching the legal and tax implications of the different options and in hindsight this was wasted effort. If you are building something of value then it is worth getting the help of professionals to make sure that you are structuring everything properly.

You might even consider a service like http://www.legalzoom.com/ if costs are one of your concerns. I do highly recommend that you seek advice, though -- if this venture is important to you and you think it might be successful, it would be worth it to get good advice up front. You don't want to have trouble down the line. For example, you can't "incorporate an LLC" -- LLC's and incorporation are two very different things.

Most states require entities (corps or LLC's) to register the entity in their state if the entity is "doing business there."

Registering in Nevada and Delaware would require you to pay a registered agent an annual fee. This is in addition to registration and annual state fees for the state where the entity is established, as well as the state(s) where it is registered.

Corporations and LLC's are typically established for personal liability protection. Such liability protection applies equally to software companies as well as soft ice cream companies. As mentioned above, S-Corp is another way to go, however, there are many more formatilities involved in S-Corp's versus LLC's and there are also certain criteria that must be met to qualify for S-Corp status. In addition, some states, e.g. Massachusetts, require a minimum tax be paid (in addition to state annual report fee) for all registered corporations, even if you experience a loss. You can find some additional information concerning the differences between LLC's and Corps at http://www.contactmylawyer.com/business-services/incorporation/

Note, client's have come to me after bad experiences with some online incorporating services. For example, wrong address entered in and the remedy offered by the service was that the client pay an additional several hundred dollars to resolve by filing an annual report that was not due, and where state does not even charge for change of address filings. Also, typically, it is much more difficult and expensive to remedy a problem then prevent one.

Disclaimer: This response is provided for informational use only. This response is not intended to be and is not legal advice. Consult an attorney directly with regard to the specific details of your situation.