Figure out the Legal Wrapper for your DAO

Creating the right legal structure for your DAO is essential. Get started with a DAO Jurisdiction Discovery Session

Your DAO needs a good legal structure, or a "DAO Legal Wrapper" to

  • Hold the DAO treasury
  • Protect DAO members from unlimited liability
  • allow DAO members to vote

Legal Nodes can now provide a platform to DAO founders, so that they can securely wrap their DAO

Start out with a DAO Jurisdiction Discovery Session

Use your discovery sessions to build a roadmap for implementing your DAO Legal Wrapper

Get a virtual legal team assembled by legal nodes who will start transforming your roadmap into a Legal Wrapper

Why start with a DAO Jurisdiction Discovery Session?

This session kick-starts the process by helping you figure out which are the best countries for your DAO project to establish its legal structure.
Your initial discovery session includes:
  • Intro to Token Legal Design & DAO CapTable
  • Intro to Crypto-friendly countries
  • Full checklist for DAO Legal Wrapper next steps
$200
USD
For 1 - hour session
BOOK A SESSION
Usually, our clients need between 1-3 sessions to figure out the whole structure for their DAO Legal Wrapper and proceed to legal works.

Our DAO Jurisdiction Discovery Sessions are perfect for

Helping DAO founders understand how they can create a fundable legal structure for their DAO

Helping DAO founders understand the legal risks and implications of different types of tokens

Helping founders who haven't got a clue where to start with legal structuring for their DAO

Each country offers different legal benefits for DAO projects. The most crypto-friendly countries for DAOs include

Switzerland
Allows Foundations and Associations as forms for DAO Legal Wrappers, plus has a special authorisation of web3 companies in self-regulating organisation for token issuance.
Liechtenstein
Allows the creation of for-profit Foundation and has a particular law covering security tokens issuance.
Wyoming, USA
The first US state to define LLC as a legal form of DAO incorporation on the state legislation level.
Singapore
Allows the creation of non-profit Foundations and has a particular law that regulates licensing of payment tokens issuance.
Cayman Islands
Allows Foundations with an option to assign a supervisor for the DAO-guardian’s role and allows issuance of government tokens.
Marshall Islands
Has an option of a non-profit LLC as a particular type of legal entity for DAO, allows a simplified onboarding of DAO members and confidentiality of DAO members register.

Curious to know which country might be best for your DAO?

Book a Jurisdiction Discovery Session with our team of crypto experts
BOOK A SESSION

Tap into a network of legal experts who’ve helped many web3 projects

The legal interview sessions we had showed that Legal Nodes has a profound understanding of the blockchain market. And the virtual legal team they assembled worked more efficiently than big in-house departments.

Viktor Ihnatiuk
CEO & Founder @Boosty Labs

Legal Nodes have been so helpful in guiding me with my first steps around establishing my Web3 startup legally. It's a very complex space, and it's really reassuring having someone so knowledgeable to reach out to.

Shane Neubauer
CEO & Co-founder @Beyond

Legal Nodes helped us to choose the jurisdiction and register a company for our Web3 Product Lab. For this purposes they assembled a dedicated team of legal professionals and helped us with the legal data room setup.

Yuliia Skofenko
COO @Binary Star powered by NEAR

The legal interview sessions we had showed the Legal Nodes has a profound understanding of the blockchain market. And the virtual legal team they assembled worked more efficiently than big in-house departments.

Viktor Ihnatiuk
CEO & Founder @Boosty Labs

Legal Nodes have been so helpful in guiding me with my first steps around establishing my Web3 startup legally. It's a very complex space, and it's really reassuring having someone so knowledgeable to reach out to.

Shane Neubauer
CEO & Co-Founder @Beyond

Legal Nodes helped us to choose the jurisdiction and register a company for our Web3 Product Lab. For this purpose they assembled a dedicated team of legal professionals and helped us with the legal data room setup.

Yuliia Skofenko
COO @Binary Star powered by NEAR

FAQ

What is a “DAO Legal Wrapper”?

It is often assumed that the trust in a DAO does not need a legal structure, as the trust itself is based on the laws of maths, and also relies on blockchain consensus protocols. This may be partially true, however whenever a DAO plans to attain investment, from an individual or a venture fund, or begin signing legal documents–such as agreements with contractors–or listing a token on an exchange, problems begin to arise.

This is because a DAO needs to be incorporated, in order to undertake these actions. Essentially, a DAO needs some kind of “legal wrapper”, a setup in which it can operate in the business world, legally, with a framework that gives legal assurances to investors, governments, and business partners.

A legal wrapper is not only the scissors to bureaucratic red tape, it is a process that nudges members of the DAO to take the necessary steps and ask the right questions about how they can make the most out of their DAO, without hitting legal pitfalls and stumbling blocks.

What are the risks of unregistered DAO?

An unregistered DAO can lead to multiple risks and barriers to a DAO’s optimal performance. Primarily, unregistered DAOs will struggle to form the relationships they want with investors, cryptocurrency exchanges, contractors, and other business and legal entities. There are also prominent legal risks associated with unregistered DAOs:

  1. Judicial liability, whereby a non-incorporated DAO is recognised as a General Partnership, placing liability on every single member of the DAO, and putting them and their assets—at risk of legal proceedings.
  2. Tax liability, whereby DAO members can face fines and penalties in the event of the non-incorporated DAO failing to pay the correct income taxes.
  3. Financial (and even criminal) liability, whereby the routine procedure of attracting funds from new DAO members without following the required verification procedures, including checking the sources of the funds, could result in criminal investigations for financial crimes.

What is the most common legal form of DAO registration?

The most popular, and therefore most common, means of DAO registration is a foundation, a self-owning entity, which allows members to make contributions to fund the DAO. The foundation does not have any owners (ie, members are not equivalent to shareholders of a company). 

That being said, members of the DAO foundation can vote on governance proposals and can elect a trusted person to act as Guardian or Supervisor. This special role ensures proper organisation and implementation of voted-on decisions. The DAO foundation owns the Treasury (the virtual assets that are to be used for foundation purposes only). The DAO members are entitled to vote on how the assets are used. Once a decision is arrived at, the Supervisor will open the Treasury and release the assets or finances required for the specific initiative that has been voted on by the members.

The foundation operates via statute, which sets goals on how the DAO can spend its funds, how members are to be accepted into the organisation, and the DAO governance rules, such as voting procedures. 

Which country is the best location for DAO legal structuring?

Choosing the best country depends on your legal needs and preferences, and the variety of different options available to you. There are three key criteria to consider when choosing the best location to incorporate and legally structure your DAO.

  1. Do you wish your DAO to receive profit and distribute this profit amongst DAO members? If so, countries such as Panama, the Bahamas, and Liechtenstein are best. For non-profit DAOs, countries such as Switzerland, the Cayman Islands, or the British Virgin Islands are best.
  2. Do you want your DAO to be able to make a public token sale? If so, some countries require permits, for example, you will need a VASP authorisation if your DAO is incorporated in the Cayman Islands or Singapore, whereas no permit would be required if your DAO is incorporated in Panama or the Marshall Islands. 
  3. Finally, some countries require KYC procedures and maintenance of a register of DAO members. These countries include Switzerland, Liechtenstein, and Singapore. Other countries have fewer or even no KYC requirements, such as Panama, the British Virgin Islands, and the Marshall Islands.
How to choose the most suitable legal solution for your DAO

There are many resources advising the best legal wrappers for your DAO, however each DAO is unique, and without proper legal guidance, your DAO legal wrapper may be insufficient or may underperform and hinder the growth of your DAO.

Speak with a Legal Nodes expert today and discover which legal solution is best for your DAO. 

Start creating a Legal Wrapper for your DAO by booking a Jurisdiction Discovery Session

BOOK A SESSION

Not ready to book a call yet?

Take our quick 4-step questionnaire and get a jurisdiction recommendation for your DAO. Plus get a free Playbook on choosing a DAO Legal Wrapper.