DAO LLC Operating Agreements & Amendments

Operating Agreement (OA) Overview

• A DAO LLC’s Operating Agreement is its core organizing document and defines:

  • How the company tracks its Members (e.g., on paper vs. with a token)

  • How Members join or leave

  • How decisions are made

  • How profits (if any) are used and distributed

  • How smart contracts are involved

  • Other important elements of how your organization works

• What you put in your OA is almost entirely up to you and your lawyers. You can write one from scratch or modify our template in almost any way you wish.

• We highly recommend having a lawyer review your OA and all other legal decisions related to your company and its formation. We can help introduce you to a lawyer if you need one.

Operating Agreement Template

View our detailed Operating Agreement Template here

• MIDAO provides updated templates, operating agreement support, and operating agreement workshops to various degrees with our different packages.

• MIDAO is not a law firm and does not provide legal advice. Read our full legal disclaimer here. We recommend seeking legal advice regarding your operating agreement and can help connect you with leading Web3 & DAO lawyers.

• An editable, Word version of the operating agreement is available to MIDAO clients on their onboarding portal.

Questions you will need to consider as you develop your OA include:

• Are you looking to establish a non-profit entity (e.g., so that it has no taxes) or a for-profit entity (e.g., so that it can distribute accrued profits to Members)?

• Will your DAO track membership on paper (usually on an exhibit to your OA) or use a token or Multi-Sig to track membership?

• Does your DAO have a Multi-Sig committee that manages its treasury, such that you want to legally require them, for example, to sign in accordance with the DAO’s wishes?

• What type of governance/voting structure will you use, and to what extent will you write it on paper, or will you reference a smart contract containing the details?

• Does your DAO want to have Managing Members who act as an interface between the DAO LLC and the outside world? For example, Managing Members can make opening bank and other trad-fi accounts easier since most non-DAO companies have managers.

Initial Contributions

• The Initial Contributions section of a DAO LLC's operating agreement, like that of a regular LLC, is one way to have Members signing the operating agreement acknowledge that property is contributed to and, therefore, owned by the company rather than by individual members. The section is optional, and DAO LLCs can also perform contributions using instruments separate from the operating agreement.

• In the initial contributions section of an OA, it is common to list assets owned collectively by the DAO LLC, such as wallet or treasury addresses, Discord accounts, AWS accounts, any IP (e.g. the DAO's name & logo), etc.

• Some DAOs will also list start-up costs. This can be whatever you spent your start-up costs on or any money/assets you want to contribute to the company to cover upcoming start-up costs, to make it clear that those things (accounts, money, etc.) are now owned by the company (the DAO) and not by the individuals who purchased the items or previously held the money.

Amending an Operating Agreement (OA)

• You can use an amendment to your operating agreement (or any process outlined in your current agreement, such as an on-chain proposal) to change anything about the agreement. This is something you do on your own. As soon as you sign an amendment or otherwise follow a process outlined in the current agreement, the change is complete.

• There is no cost to amend your agreement, it is valid as soon as it is duly executed. MIDAO and the government do not have to do anything to execute the change. You can make changes as often as you want, in any way you want, at no cost and with no involvement from MIDAO or the government.

• At annual filings in January, a DAO LLC has to send MIDAO an updated copy of its latest operating agreement. A DAO LLC can also optionally send MIDAO a copy of an amended OA at any time so that the Marshall Islands has the latest information on file and can produce updated documents like a Certificate of Incumbency for the DAO LLC, as needed, with the latest information.

• Download a sample operating agreement amendment here.

• DAO LLCs and their lawyers are responsible for ensuring that any amendments (or any other business actions you take) are consistent with your organization’s policies and procedures.