$500 for incorporation is a very low figure for some states. If I remember right, the cost of incorporation as an LLC in Massachusetts (which is what I was researching at the time, because that's where I am) runs about $1000 between what you end up owing the state and what you end up owing the lawyer; incorporating as an LLC in any other state means you need to register as a foreign corporation with the state if you intend to do business in that state (in MA: lease property as a corporation, pay salaries as a corporation, own property as a corporation), which in Massachusetts runs about $1000 between what you end up owing the state and what you end up owing the lawyer.

Other states may be more lenient on when you need to register as a foreign corporation or cost less to incorporate or register as a foreign corporation. Also, for some startup models, it can make sense to incorporate in Delaware when you start development and then worry about the whole foreign-corporation thing when it's time to start hiring employees rather than adding partners.