The Marshall Islands (RMI) DAO LLC vs. Other Jurisdictions & Legal Forms
Note: Sometimes it is beneficial to combine an RMI DAO LLC with other legal entities around the world, such as Delaware C-Corporations or LLCs for a "Dev Co", "Op Co", etc, or even a Foundation structure. Read more about corporate structuring here.
MIDAO is not a law firm and does not provide legal advice. Please read our full legal disclaimer here.
General Benefits of the Marshall Islands vs Other Jurisdictions
The Marshall Islands (MIDAO) DAO LLC is the most DAO- and Web3-friendly legal entity in the world, and is available a tax-free Non-Profit or a For-Profit.
Few other jurisdictions have recognized DAOs & Web3, let alone established a legal entity structure dedicated to them. Most jurisdictions that have recognized DAOs and Web3 are states within the United States, making them less favorable from many regulatory perspectives.
The RMI has a strong association with the US, while not being under US jurisdiction. The core corporate law in the RMI is based on Delaware corporate law, making it easy to work with, while still benefiting from its more advanced Web3 & DAO legislation. The Marshall Islands enjoys some of the benefits of being a close ally (what's called a "freely associated state"), such as its use of the US Postal Service, while still retaining legal & regulatory sovereignty.
No nation in the world has this balance of stability, coupled with the flexibility and technological blockchain understanding to pass DAO-friendly legislation.
The Republic of the Marshall Islands (RMI) has long been a prominent jurisdiction for international business and investment companies due to its nominal corporate taxation, limited reporting requirements, and legislation based on Delaware law. In addition to being a leading jurisdiction for the shipping industry, over 40 public companies traded on NASDAQ and NYSE are domiciled in RMI.
RMI DAO LLC vs. United States (US) State Entities
An important question for any legal entity decision is whether or not to domicile in the United States. Creating an entity in the United States increases your legal nexus there and makes you subject to more US laws & regulations. If you do want to incorporate in the US (or are required to, for example because most or all of your project activity takes place in the US), the WY DUNA or DAO LLC may be a good fit for you. You can read more about choosing between the US and "offshore" in our Guide to DAO Incorporation.
One of the key concerns for US entities is around launching tokens or leveraging tokens in any way, and how that might cause regulatory issues in the hostile US environment for crypto.
RMI DAO LLC vs Wyoming (WY) DUNA
See above re: US entities.
The WY DUNA is an unregistered legal entity (the U stands for "Unincorporated") which means it does not have all the same benefits of a registered legal entity, such as the ability for a bank or other third party to verify its validity with a government.
The WY DUNA, despite having "Non-Profit" in the name and having many limitations usually placed on non-profits, is taxed by the United States as a for-profit corporation. While it is theoretically possible that a DUNA can receive non-profit tax status from the IRS, it is unproven and takes a lot of time and effort compared to the easy of use of an offshore, tax-free non-profit such as the RMI DAO LLC.
RMI DAO LLC vs Wyoming (WY) DAO LLC
See above re: US entities.
The WY DAO LLC is a for-profit entity, with pass-through tax status by default, and so it does not have the tax-free benefits of the RMI DAO LLC.
The WY DAO LLC has some odd requirements written into the law, such as for the DAO LLC to have activity every year or else be dissolved.
The WY DAO LLC lacks some of the other RMI DAO LLC benefits of clear securities law treatment and on-chain-only reporting requirements.
RMI DAO LLC vs Delaware (DE) and other traditional LLCs
See above re: US entities.
DE LLCs and LLCs from other states in the United States are for-profit entities, with pass-through tax status by default, and so they do not have the tax-free benefits of the RMI DAO LLC.
DE LLCs and LLCs from other states in the United States require companies to know the names and physical addresses of all their members, thus making it ineffective to use a token to track membership.
DE LLCs and LLCs from other states in the United States require companies to have Managers, making it impossible for a company to decentralized (when it's ready) to a Manager-less structure.
RMI DAO LLC vs Associations & Foundations in the Cayman Islands, the British Virgin Islands, Panama, and Switzerland
The primary issue with Foundation entities (e.g. "Foundations", "Foundation Companies", etc) is that they require companies to have Directors. These Directors have some power and responsibility regarding the Company, making it impossible for a project to truly decentralize when it's ready. The Directors, for example, have to sign off on every decision a DAO or other project makes, meaning the project lacks autonomy.
Most jurisdictions also require Foundations to hire a local, independent director and a local law firm, greatly increasing cost, effort, and complexity. These structures can easily cost tens or hundreds of thousands of dollars to set up and tens of thousands of dollars a year to maintain.
Note that an RMI DAO LLC can elect to have Managers (or Independent/Nominee Managers) to play a similar role to a Foundation Director, at their discretion. The benefit of the RMI DAO LLC is that such a role is not required.
Until the advent of the RMI DAO LLC, many crypto projects were even recommended to create a BVI Foundation wholly owned by a Cayman Foundation, because they prefer the governance structure of the Cayman entity but the token laws of the BVI. Using an RMI DAO LLC, you can get the benefits of both entities without the need to create multiple entities!
Swiss Associations have the same problems as the Foundation structures listed here.
RMI DAO LLC vs Master-Series LLCs
There are good use cases for Series LLCs and Series DAO LLCs, such as DAOs with sub-DAOs or investment companies with multiple portfoilos. Read more here.
Using a Series LLC purchased from a third party who controls the Master LLC is a risky move and generally not recommended by lawyers because it risks assets and liabilities not being considered separate from the other organizations using the other Series under the Master.
A Series LLC, because it is not registered with any government, will likely have difficulty opening a bank account or passing any other KYB compliance process, unless it is actually associated with the organization controlling the Master.
If you decide a Series LLC purchased from a third party who controls the Master LLC is the right decision for you, the nice thing is that the cost is extremely low, as no government registration or compliance is necessarily required.
MIDAO DAO LLCs are restricted from being used as Masters from which to sell Series for use by independent organizations for the reasons listed above. See MIDAO's Terms of Use for details.
RMI DAO LLC vs RMI LLC
A regular LLC (as opposed to a DAO LLC) can be created only with the general Marshall Islands offshore registry, IRI, whereas DAO LLCs can be created only with MIDAO.
The regular LLC does not get any of the benefits of the DAO & Web3 legislation and benefits, as they apply only to DAO LLCs.
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