There are defininte tax advantages to setting up an LLC (versus a corporation, etc.). 

Typically one can set up an LLC in any state, so long as they have a local address for delivery of notices.  (I think companies like the The Company Corporation will provide the local address for you). 

If you want to do business in a state other than that in which the entity is formed, you typically have to register as a foreign corporation in that state -- a form that's is typically completed online, and a fee paid with a credit card.