Legal advice for starting a DAO

Transcript

know if regulators quite understand how weird and crazy this world is of dao's right now and these just internet communities like you know just joining up over a token what's up friends welcome to web3 academy a place for entrepreneurs creators and marketers to explore and learn how to use web3 to transform business models and create thriving communities enjoy this next episode let's move to dallas we just talked nfts um we talked already kind of tokens in the howie test dows is kind of the new exciting thing there's so many people getting into this and these require tokens and so i'm just curious um and i don't know if you guys are both like involved in dao's or if you've like gotten really into this this area but what do dows need to be thinking about when they go to start if they're going

to launch a token or they're going to do whatever should they be like you can file i think as an llc you can you can go as like um a not-for-profit i guess you can put your dow under you can do combinations um what do you guys see in there i guess we can do both in canada and the us and like any advice for those that are starting diaz and what what they should be looking into in terms of the legal aspect or regulatory um lisa maybe you can start yeah so um we have a few dows as clients so we deal with this issue all the time and it is really interesting of course it's an emerging area of law there is no clear answer yet but i think a lot of things depend on like what kind of transaction does the dow do

where are the majority of the owners what does their token do things like that kind of play into the analysis but i think that overall it is helpful to get a traditional legal structure in the u.s potentially some people do um like a corporation in delaware and then maybe or i have a foundation in the cayman islands because you technically don't need any owners that kind of fits with dao so there's um wyoming has a law but as far as i understand it's a really great law but people haven't tested it out yet and haven't really done that if a project is kind of looking for investors sometimes the delaware c corp is really preferred because investors are

comfortable with that they understand the laws of delaware it's very friendly to businesses so a lot of factors depend on it but i think sometimes people think that if they don't get any type of legal entity structure that it might they might be safer but the thing is the us regulators at least you know they determine someone to be a us company or subject to us regulation if they are transacting business in the us and using us customers so it's it's like the default would be a doubt could be considered a general partnership which actually has pretty much unlimited personal liability for all the dow members so it's not favorable so let's say if you don't have a legal

entity and someone from the dow signs a contract on behalf of a dow but it doesn't have a legal entity structure they could potentially just be putting themselves liable for their contract so i think that if they you know it's a lot of people would not prefer to have a legal structure but i think that it actually is better than having not no legal structure then the regulator is kind of just assuming the worst yeah i think you nailed it like that's that's 100 accurate from my perspective you know i think for people starting projects one of the things to keep in mind you know is really first of all what's your perspective are you are you more of a traditionalist and a purist or you know uh are are you uh more focused on

what we think of as legal certainty right and i think that's what lisa's kind of driving at um you know if you're more comfortable playing in this in a you know space where you don't have legal certainty as to what the nature of your entity is you run the risk that a regulator is going to come find you and apply treatment to your project that is the least favorable of the options to you which as lisa was saying could mean that you and all of your members are personally liable for not just the amount of money you put in but other stuff you've got as well uh and that's obviously a negative outcome but if you're like you know if you take the first foot forward and you know you take a proactive step and kind of putting a

flag in the sand and saying we are going to be treated as for example a limited liability company that you know theoretically means that the members and the creators are only liable for what you've put in and you've got more certainty around that angle you know regulators will find you whether you want to be found or not generally from my experience particularly in the us so as much as folks like to think that they can be you know outside of the scope uh once the scope shines its light on you uh there are things that could happen you that you may not want so it's again i think you know from perspectives you know of founders and

members what's more important to you right testing the system testing the space um playing in that unregulated zone or having certainty and having you know more of a proactive stance of who you are and what you're doing you know it's interesting i'm trying so we just launched the dao over the last month our community our podcast community and our newsletter community um they just came to us and said hey we want to launch a dao we want to further the mission of what web3 academy is doing we want to build resources and products and things in the space and we were like okay sounds cool like there's a bunch of people in the community and everyone wanted to do it so we're like all right but it's a bunch of people in a discord a lot of them are anon we have no idea who they actually are i have no

idea where they're from uh so it's like okay we have this token it's valueless right now so it's not even on open markets or anything so we're fine for now um but it's like i wouldn't even know what country we should get you know regulation in because i don't even know where our members are from you know so it's like it's almost it's not that easy i feel like and i don't know if regulators quite understand how weird and crazy this world is of dao's right now and these just internet communities like you know just joining up over a token so i guess we'll see how that that one plays out thank you for listening to web3 academy we hope this helps you along your web 3 journey if it does please share this episode and subscribe so you don't miss the next one by the

way if you have yet to join the discord community you are missing out this is where all the magic happens this is where we learn where we ask questions where we network uh you want to be in there the link to join is in the description below and finally a quick disclaimer nothing in this podcast was financial advice crypto and web3 can be risky you can literally lose it all in fact if you invest on account of what we say you probably will lose it all so don't do that in all honesty the point of this podcast is to remove the noise of markets and price and focus on utility implementation anyway so you should not take any of this as financial advice thank you friends and see you in the next one