A Legal Framework for Decentralized Autonomous Organizations
Publish Date: 30-10-2021
Source: Andreessen Horowitz
Synopsis: The purpose of this paper is to identify a number of taxation, entity formation and operational issues pertaining to Decentralized Autonomous Organizations (“DAOs”) and to suggest a domestic entity structure capable of addressing such issues, including filing and paying U.S. taxes, opening an entity bank account, signing legal agreements and limiting liability for DAO members. A threshold question for determining the most appropriate domestic entity structure for a DAO is to determine whether it has a for-profit or not-for-profit purpose. Not for-profit purpose is not equivalent to tax-exempt and although very few DAOs will qualify as tax-exempt organizations, many may meet the requirements of not-for profits for state law purposes. Accordingly, DAOs that meet the requirements should consider registration as unincorporated nonprofit associations (“UNA”) in states that recognize such an entity form.
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