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.

• 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 don’t have to wait to be able to afford registration. Check out https://www.midao.org/pricing to determine your eligibility for our Bootstrap and WAGMI packages.