If a friend and I want to incorporate but our businesses but live in different states, is this still possible?

You can incorporate any business in any state in which you initially file the incorporation papers. Thus,even if you live in Michigan and your friend lives in Texas for example, you can file your company's incorporation papers in Illinois if you so chose. Just make sure that you follow all of the incorporation rules of that given state, and that you list who the registered agents are in the filing papers.  When incorporated properly, the incorporation gains it's legal status based on the State in which the Articles of Incorporation are filed, or the corporations principal place of business (i.e. that state in which the corporation performs the bulk of its business).