This guide was built to help you understand the benefits of incorporating your DAO and how the process of DAO incorporation works. We help you answer questions like:
Why should I incorporate my DAO? In what geographic jurisdiction should I incorporate my DAO? What legal entity type should I choose?
Get all the information you need to make the best decisions for you DAO by reading this guide.
If you’re not recognized as a legal entity, all of your contributors are at significant risk. If you get sued, all of your contributors’ assets could be seized. Incorporating is the best way to avoid these risks. Incorporating in the Marshall Islands is the best way to avoid these risks.
The best way to protect your DAO contributors is to incorporate as an LLC. This ensures everyone can keep their assets and their future earnings even if the DAO is sued or under a legal crisis.
If your DAO gets sued, whether it is for-profit, or not-for-profit, any number of these things could happen:
- Your contributors are liable, meaning their personal assets will be under attack. In other words, everyone will be paying up.
- Your anonymous contributors will have to share their identity.
- You’ll need to create a centralized entity going forward, which is against your ethos of decentralization.
If you don’t have corporate personhood, your DAO can’t technically own any Intellectual Property or hire employees. Put simply, your DAO has no capacity to own assets, enter into agreements, or act as an individual entity in the corporate realm without incorporating first.
If your DAO needs to open a bank account to manage fiat currencies, it’s impossible unless you establish corporate personhood. And, if you’re signing contracts and interacting with third party companies outside of the DAO, the contracts don’t hold up under the law without corporate personhood.
If you’re a social DAO, think about the vibe shift if everyone had to transfer funds to whoever is suing you.
If you’re a DeFi DAO, think about the contracts and agreements you may sign to partner with other organizations.
If you’re a VC or investment DAO, think about the safety of all those assets under your management.
If you’re still figuring out what kind of DAO you are, regardless if it is for-profit, or not-for-profit, incorporation is always a good idea.
Without a tax entity, all your members can be held accountable for taxes on any net earnings your DAO generates. If you sell a bunch of NFTs, for example, your members would have to pay taxes on those gains.
A MIDAO DAO LLC not only protects your members from having any tax reporting or liability, but the entity is also not taxed by the government. Think about all the money this will save you and your members!
This guide was built to help you understand the benefits of incorporating your DAO and how the process of DAO incorporation works. We help you answer questions like:
Why should I incorporate my DAO? In what geographic jurisdiction should I incorporate my DAO? What legal entity type should I choose?
A limited liability corporation (LLC) to protect you and your contributors
Physical address in the Marshall Islands
Automated Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT)
Corporate personhood, which allows your DAO to own assets and enter into agreements
Annual document filing on your behalf
White glove service from beginning to end
Recognition of smart contracts
A point person to work with the Marshall Islands government
Help with creating your legal documents, such as your operating agreement
The opportunity to weigh in on legislation
All beneficial owners or members (those with 25%+ governance rights) must have current passports and complete KYC. Our third-party vendor validates their residency and citizenship and checks against sanctions and blacklists.
- Operating Agreement
- Certificate of Formation
- Foreign Investment Business License (FIBL) application
For more RMI specific info, check out our info sheet.
The Marshall Islands provide a legal entity home for DAOs. Registering as a non-profit LLC establishes corporate personhood without paying taxes to the Marshall Islands. And, the DAO can register without a single person taking liability for the entire DAO. Instead of the entire organization signing the operating agreement, just the DAO founders need to. And don’t worry about raising a red flag based on where you’re registering—40+ NYSE and NASDAQ companies and 20% of the world’s shipping capacity are registered in the Marshall Islands, so it’s not an uncommon place to base your business.
MIDAO offers both for-profit and not-for-profit DAOs in the Marshall Islands. Our for-profit DAO option became available in December 2022.
We helped pass a law in the Marshall Islands that allows DAOs to simply list the smart contract that their governance processes take place in. You won’t have to write out all the technical details, or even list your members. Simply provide information on the smart contract and token, and you’re all set.
The Marshall Islands are a best-of-both-worlds spot for DAOs, because they’re a sovereign nation that still receives protection and government services from the U.S. For example, the Marshall Islands use the U.S. postal service and receive military protection, but are not subject to the laws of the U.S. As an added bonus, lawyers around the world are comfortable working with the Marshall Islands because of its similarity to the U.S. and history of traditional incorporation.
No, only members who hold a substantial portion of the tokens (more than 25% each) need to share their information. The remainder of the DAO can remain anonymous.
As little as 30 days.
A MIDAO DAO LLC not only protects your members from having any tax reporting or liability, but the entity is also not taxed by the government.
Just reach out, we’re always around to answer any questions.
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