When we try to create SharePoint 2010 project with Sequential or State Machine Workflow project template from Visual Studio 2010 – there’re only option allow you will get is to deploy such workflow to the farm. It’s not available if you want to develop solution for the cloud.

However, there is a way to workaround depend on the level of customization you need for your workflow.

1. Open your target site by SharePoint Designer 2010.

2. Click Workflows under Site Objects and click on the ribbon Reusable Workflow button.

3. Set your workflow a name, after that SharePoint Designer will open a UI allow you to create the workflow by adding workflow activities into steps.

Now you can create your sequence workflow, but you need transfer this workflow to Visual Studio and deploy it with the rest of your solutions as below steps:

1. Click Save as Template ribbon button to create the base for your workflow,

2. This step will save WSP file workflow solution to the Site Assets library (at ~site/SiteAssets/)

3. Download a WSP file and open with Visual Studio 2010.

4. From Visual Studio 2010 project, click Import SharePoint Solution Package.

5.  Now you will specify type of your solution, which you can set as Sandbox solution and give the file path for the your sandbox solution.

After your solution has been imported to VS 2010, you can to make changes to it and add new workflow activities in Visual Studio. When finished, you can build the project again for WSP file or include it as a part of your overall deployment.