See why you should consider turning your DAO into an LLC.
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Since decentralized autonomous organizations (DAOs) were given the same rights as limited liability companies (LLCs) in Wyoming, the blockchain and cryptocurrency industries are seeing this as a game changer in business formation and business ownership.
People forming DAO LLCs will now get the best of both worlds. The LLC model offers benefits like limited liability for its owners while having the democratized voting structure of a DAO where all members have a voice.
If you don’t already know, you can catch up on what LLCs are and how they work. In the meantime, let’s go over the benefits of starting a DAO LLC in Wyoming.
Since DAOs in Wyoming have been given the rights of LLCs, these organizations will have the same benefits and will be established in a similar manner. You’ll enjoy these benefits if you create a Wyoming DAO LLC:
LLCs, on their own, are very popular since they offer limited liability to its owners. With a DAO LLC, you get the same benefit, which can be even more appealing since the organization is only run by its members rather than owners/partners.
Limited liability is a great thing to have since any legal troubles the organization runs into won’t affect your personal assets. For example, if the organization gets sued, the members’ personal assets can’t be used to pay off debts.
Setting up a DAO LLC from scratch can be relatively easy. With a regular DAO, you’d typically start the process by creating a mission statement where the organization’s structure and its features are detailed. Things will play out differently, and maybe even easier, for a DAO LLC.
We hate to sound like a broken record, but it bears repeating that DAO LLCs will follow a typical LLC business model for the most part. And your document drafting process will start with creating Articles of Organization, which we’ll go into detail a little later.
Like the Articles of Organization, a DAO LLC’s taxes will be handled similarly as a regular LLC.
LLCs avoid double taxation, meaning the company and the owners aren’t taxed separately. This is great since it can save you money, time, and paperwork. Since DAOs in Wyoming will follow the LLC structure, their taxes work the same way.
This is a huge plus since regular DAOs are presently (as of March 2022) in a gray area when it comes to how they pay taxes. Not so with DAO LLCs.
The organization’s profits will be taxed only once through each member’s individual income tax return. And, as a cherry on top, the organization’s members may qualify for a 20% deduction of their business income thanks to the Tax Cuts and Jobs Act of 2017.
If you need more information about your DAO LLC’s taxes, we suggest speaking with a licensed professional.
The great thing about starting a DAO in Wyoming is that it will follow the LLC structure. LLCs are very popular with business owners since they offer some benefits like limited liability, appealing tax features, and an easy startup process.
In Wyoming, the process of starting a DAO LLC will be the same as starting a regular LLC. This includes mostly the same fees and steps needed to establish one as you would an LLC.
There will be a few minor differences, though, like choosing the “Decentralized Autonomous Organization” option as the additional designation for your LLC.
The Wyoming Secretary of State’s website has a complete list of FAQs for setting up a DAO LLC.
A DAO LLC’s structure can be identified as democratized. This means that each member of the organization can vote for changes to be made in how it operates, how it does business, or other functions.
In a corporation, for example, only the board of directors handles these decisions by voting on them. With a DAO LLC, things work in the opposite direction.
No one single person or group of persons do this, and it’s left up to the members of the DAO LLC. This gives everyone a voice through a vote.
Unlike a regular LLC where the business’s inner workings are typically left for the owners to know, a DAO LLC’s members are always kept in the light about the organization’s functions.
This is a huge plus if you’re going into business with people you need to trust. Since DAOs involve people working together through the internet, 100% transparency is needed. The basic DAO model offers this, and it’s the same with a DAO LLC.
The organization’s code (that we’ll talk about later) is fully trustworthy, transparent, and verifiable to all members at all times. The only way the code can be changed is by a vote, meaning all members will be aware that a change is being considered.
DAOs and DAO LLCs are new compared to other business types. Today’s internet users and younger generations consider DAOs to be the future of business. Wyoming is already on the forefront for making them legal entities, and DAOs appear to be picking up steam across the country. Starting one now may be the innovative move that’s right for you.
With a DAO LLC, you’d be drafting Articles of Organization, which can be much easier since most of these documents follow the same drafting process across all 50 states. This includes adding information like the DAO LLC’s name, identifying its owners, etc. We have a guide detailing how to draft these articles.
Note that the Articles of Organization should state that the LLC is a DAO. You’ll also need to file these articles with the Wyoming Secretary of State.
Also remember that since your DAO will use the LLC legal entity status, it will need to meet certain requirements as stated in the Wyoming DAO law. For example, it must have a registered agent.
If you don’t know how a registered agent works, how to get one, or why they’re beneficial, we can help with our detailed article about them.
Wyoming officially recognized DAOs, specifically DAO LLCs, as a legal business entity on July 1, 2021. This business type is the first of its kind, paving the way for future business owners to see just how beneficial the structure is.
If you’re familiar with LLCs, then you might be wondering what the point of merging one with a DAO model is. Both have their upsides, and combining them can be something that could bring a handful of benefits like the ones we went over above.
Earlier in the article, we mentioned how DAOs work in snippets. Here, we’d like to go into a little more detail. A DAO is a unique business model governed by a set of specific rules – but with a twist. A DAO’s rules are embedded into a decentralized computer program. No person has complete control over the program.
Since the rules are embedded into the system, they’re automatically enforced. This applies to things like scheduled payments. And since the organization is decentralized, the rules can’t be overridden, and changes to the organization’s structure can only be made through voting.
If the information in this article sounded like too much to take in at once, especially with how DAOs work, don’t worry. DAO’s are very intricate, and explaining how they operate will take an entire article. Luckily, we have one where you can learn about DAOs much more in depth.
Now that you have a better idea of what a DAO LLC is and why you should take advantage of starting one in Wyoming, we can help. Our services extend to many sides of business formation and growth. Get started today on making your business idea into a reality with a DAO LLC in Wyoming.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Since Wyoming recognizes DAOs as LLCs, you get the best of both worlds. You get the benefits of an LLC in Wyoming, like limited liability and pass through taxation, with the democratized voting structure of a DAO.
DAOs can be formed anywhere in the country, but they aren’t recognized as a legal entity outside of Wyoming. This can result in some legal headaches.
Also, keep in mind that in Wyoming, DAOs are considered LLCs, so creating a DAO LLC outside of Wyoming, specifically, can’t be done as of March 2022.
Yes, as long as you follow the rules and regulations of Wyoming law concerning DAO LLC formation, anyone can form this business entity.