# Importance of Incorporating a DAO or Web3 Project with a Legal Wrapper ## Limited Liability Protection * When a group of people engages in a common enterprise (whether a DAO, NFT project, building a protocol, or anything) without a legal entity, they are all subject to unlimited legal liability and often tax liabilities, as their DAO would be regarded as a general partnership in most jurisdictions. * For a good example of how this comes into play, see the [Ooki DAO case](https://www.nelsonmullins.com/insights/blogs/fintech-nostradamus/fn-in-the-news/ooki-dao-is-a-person-that-can-be-sued#:~:text=By%20default%2C%20these%20DAOs%20are,individual%20member%20of%20such%20DAO.). * Any legal entity, RMI DAO LLC or otherwise, when used properly, reduces liability for founders, contributors, tokenholders, and other members of any project. ## Corporate Personhood * Corporate personhood allows groups of people to own assets collectively in a structured way, enter into contracts, and hire employees. Put simply, without corporate personhood, a DAO or project cannot own assets, enter into agreements, or act as an entity in the corporate arena. * Good examples include a project or DAO's treasury and intellectual property, such as its name & logo. Without a legal entity, it is unclear who actually owns the treasury and the property, making it all too likely they will end up in legal disputes. * Corporate personhood also allows a DAO or Web3 project to open a business bank account, pay for web hosting services, or sponsor an event. Furthermore, a legal entity allows a project to sign contracts and interact with third parties. ## Tax Optimization * Without a legal entity, all DAO Members can be held accountable for taxes on any net earnings the DAO generates. For example, without a legal entity, if a DAO sells a bunch of NFTs, the members would have to pay taxes on those gains, even if they never received any of the money. * A **Non-Profit** RMI DAO LLC not only protects DAO Members from having any tax reporting or liability, but the entity is also not taxed by the government. ## Incorporating Before Funding * Protect yourself from unlimited liability from the start of your organization's inception (including while raising money and launching a token) rather than only once you have already made significant progress, in order to avoid putting liability for early activity on the members. * Have your tax burden (or no taxes at all if you are creating a non-profit DAO LLC) fall on the company instead of on the founders/Members. * We offer discounts for pre-funding projects so that you can afford registration without waiting. [Contact us](https://www.midao.org/get-started) to learn more if you qualify for a discount. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.midao.org/readme/importance-of-incorporating-a-dao-or-web3-project-with-a-legal-wrapper.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.