If you signed a contract for the taking over of the business (internet-based or otherwise), check all of the provisions of that very contract you signed because it should contains provision regarding jurisdiction and/or arbitration or mediation. Any of those particular provisions may indicate that you agree the jurisdiction to be in the designated State it mentions (whether it states Texas, California or somewhere else).  Next, if you don't have such a contract or contract provision, it is usually an art form to figure it out.  The law used is the state in which the contract was signed, as the court may see it.  So if the contract was signed (executed) in California, it would most likely be California law.  Otherwise you can sue usually in the state in which the defendant resides and go from there.