I would say Maker DAO for sure. And then maybe FWB (friends with benefits) given they are a social token similar to us. Maybe also metacartel? I feel like they surely have had to navigate quite a few legal landmines given their nature in investing.
1 Like
@cryptomooniac @Bauhaus I like this suggestion. I donât know which countries would be best but my two gwei would be to explore countries who value data privacy. Places like sweden, switerland, denmark etc. Have also heard good things about Singapore and know a few crypto companies are from there (Enjin coin comes to mind). I would suggest checking the statiscs from the world economic bank and their ease of doing business metrics: Rankings
We have used this at my work to determine which locations are best to stand up new subsidiaries.
1 Like
I will check these out and see if I can get some feedback from them.
I worry that waiting for a new ânon-legacyâ system before doing anything opens all of us to legal and financial implications. And if a new, better system, came along that worked better for the DAO, we can always restructure the legal identity.
And Iâm not excited about paying tax for others who want to remain âanonymousâ. To be âanonymousâ means I canât 1099 you for services, which means I canât use that deduction as an expense, which means more taxes for those that are being responsible and allowing us to legally document them for money paid out to them.
That doesnât mean we have to fully disclose personal information to everyone involved, but it does mean providing your information to the person responsible for filing 1099âs and other tax documents at the end of each year.
1 Like
This is great. I will check out New Zealand immediately. Good to know US is #6.
I really do appreciate your feedback @saulthorin
1 Like
100% Agree with this! I believe this proposal is a little biased on American fears and perspective.
1 Like
That sounds great. Please check out Singapore too as it is known to be relatively crypto friendly (afaik). The World Bank index only considers ease of doing business in terms of how easy it is to set up and run a business. I think legislation specific to crypto is relevant for us too. Options I have been considering in freelancing context are Sigapore, Malaysia, Vanuatu and Estonia. I am sure there are other good options out there, like Seychelles seems to be making a lot of effort to make favorable regulations for finTech companies.
1 Like
Right there with you on this!
1 Like
This way of thinking is like you playing a game of chess. Because you âworryâ somebody might come for you legally and financially because we are contributing in the DAO, which is decentralized, trying to find ways to bridge centralized to decentralized to me is like âIâll bend over in advance so i make sure to play it right by the system and i donât get penalized.â The thing is, DAO, i believe is here so we are completely out of the system. There are really cool people here too, some are nomads, that are not American citizens and donât have to think about their taxes because they worked hard to get away from their country and some are anonymous and want to stay that way. I donât think itâs fair to penalize people who want to contribute their talents that way.
The proposal needs a thorough research. It is biased to only look at this from an American perspective. If you want to make it bomb for the DAO, look for options that align with the true innovative nature of this movement.
The new system, doesnât COME ALONG. We have to build it ourselves, and should really be the task here.
1 Like
- I like this structure for this reason, âSince the LLC is owned by the Corporation and the Non-Profit, the tax return would create 2 K-1s that pass through to those companies.â
- This would be key, âCooperatives have a special distribution called Patronage Dividends. This allows for qualified profits to be distributed to members AND deduct this as an expense. This prevents a lot of the âdouble taxationâ that traditional C-Corps face.â
- I saw a comment about possibly having an offshore company. I prefer a US corporation in case someone needs recourse.
- This was an incredibly well thought out proposal. Great job @Bauhaus and Legal team.
4 Likes
I agree, I think we run the risk of allowing ourselves to be subject to rules and regulations that we may not have too when we sign up to play by the centralized nation states rules early. I think in the future there will be a lot of DAOâs that look at what we do / did and imitate it.
What kind of example are we setting? I have no idea.
my 2 gweiâŚ
4 Likes
Thank you for the thoughtful proposal @Bauhaus and also to everyone for their well-considered answers. Itâs a brave new world and fascinating to watch it unfold. 
1 Like
@Bauhaus thanks for taking the time to draft this up. 
One question I had as I was reading this, are there any implications for Bankless members who are non-US based?
2 Likes
Not sure if it is a similar situation but Commons Stack created a legal entity in Switzerland - I donât know a lot of the background on it, but it might be helpful to look into that as well.
It is important to start the thinking process about this type of questions. I appreciate the thorough think by @Bauhaus ! A few thoughts I would like to contribute :
Human resources in a global context
I am not sure whether the solutions suggested are suitable for a global context. Continuing with the example of employees, the DAO is likely the hire staff outside of the US. This will mean for a lot of countries that:
- this may imply permanent establishment in that country
- which triggers tax declaration obligations as well as employer retention obligations for income taxes
- the law applicable to the employment contracts is that of the country where the employee resides, so we would have to be familiar with all of those
- the employment protection laws of some countries are quite a burden to comply with; think of filing mandatory filing of Health & Safety reports with authorities of these countries
We will have the live with the fact we are working with completely new economic structures here.
Main points to observe:
- keep as much as possible on-chain
- avoid exposure to legal issues by steering clear from employment law triggers; that means: service contracts with a clear, without anyone being able to tell these persons how to do things exactly, what times to work, where to work, etc.
to be continuedâŚ
1 Like
Legal entity
So we need a structure that allows us to pay the people working for the DAO, perhaps some service providers as wellâŚ
Payments themselves can be done purely on-chain. The main reasons I see for having a legal layer on top the blockchain are:
- limiting potential liability of DAO members (as may be the case in some countries if deemed a general partnership)
- protecting the assets of the DAO itself, to the extent third parties find a way to take recourse on them (more risk for USDT, USDC, less for DAI, ETH, etc depending on how they are custodied)
The legal structure I like most of what I have seen so far is the Cayman Islands Foundation Company. It has a lot of characteristics of a company but it is orphaned (e.g. no members, shareholders etc). Also, it offers a lot of flexibility to make payments, whether to DAI members, contractors (as I said above, preferably no employees) because the beneficiaries can be defined in a variety of ways.
Also, since it is a foundation and not a trust, recognition of its legal existence in civil law jurisdictions is warranted (a trust could be ignored).
Cayman Islands is a solid jurisdiction with a well functioning legal system. Assets are well protected against claims. Tax obligations for activities outside of Cayman Islands should be zero. Costs of set up and maintenance are higher than other countries, but I think it is preferable above other jurisdictions such as Belize or Panama. There tons of options here so I just talk based on my experience and perception of what other serious players are doing.
3 Likes
Through the partnership BanklessHQ and BanklessDAO have with Opolis, BanklessDAO does not need to worry about formation of a legal entity with regards to employment. We handle compliance, taxes, withholding, etc for a number of DAOs that do not have a legal entity. In fact, youâd be going the opposite direction of the trend right now.
Dapix â FIO Protocol, Maker â MakerDAO, Bankessâ> BanklessDAO, ShapeShiftâ> ShapeShiftDAO, Gitcoin â GitcoinDAO
These are just a few of the partners weâve helped support into the legal-entity-less space.
With regards to legal formation, Iâd actually recommend looking at a Colorado Cooperative (LCA). Colorado is known as the âDelaware of Coopsâ for a reason and the Colorado legal infrastructure is heading in the exact direction that BanklessDAO needs re: BanklessDAOâs needs.
3 Likes
Thank you for the insight, this is very enlightening @OxJoshua. Curious if there are reasons not to consider looking at legal formation in Wyoming, given that they recognize DAOs as legal entities?
Itâs not so much that Wyoming ârecognizes DAOs as legal entitiesâ - its that Wyoming allows an owner to be an Ethereum address, which is a big step forward, yes, but itâs a makeshift law that tries to shove DAOs into an LLC framework, which is really dumb (so Iâd say its a big step forward in the wrong direction).
Colorado already has a great legal framework for DAOs in the LCA (limited cooperative association) model, and they are only improving upon it.
Iâll add that the greatest value proposition to being a legal entity is the ability to open a business bank account. Would be pretty hilariously off-brand if BanklessDAO went and opened a bank account.
As to why not consider a legal formation in Wyoming, keeping in mind Iâm not a lawyer and cannot provide legal advice, it seems entirely unnecessary - especially when you look at the trend away from this framework for all the majors.
5 Likes
That seems awfully reckless. We can pretend weâre unaware that we live in a world with laws and regulations, but that doesnât make us exempt. We donât want to recreate the MS Satoshi. The disastrous voyage of Satoshi, the worldâs first cryptocurrency cruise ship | Cryptocurrencies | The Guardian