What is the legality of incorporating in a state where one owner doesn't live?

You can incorporate in any state you like, as long as you have a registered agent in the domestic state. This can be you, your partner, or even a contracted third party, as long as the registered agent agrees to the role and has a physical address in the state. (You cannot, for example, open a PO box in Wyoming under your own name and use it for your registered agent's address.)