MSTR Cat

Crypto Law/Level V · Builders and launchers/5.3 Promotion and liability/Lesson 7

Entity choice: foundations, companies and DAO wrappers

The legal forms crypto projects use to give a DAO or protocol a legal body, what each limits, and what no entity can fix.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Wyoming DUNA: no state filing is required, and an optional $5 agent statement can be filed. Members are not liable merely for membership, but it needs 100 or more members and cannot distribute profits.
  2. A Wyoming DAO LLC costs $100 to file and at least $60 a year in license tax, and its articles need not list members. It must name its smart contracts and keep a registered agent.
  3. Since FinCEN’s March 2025 interim rule, US-formed entities owe no beneficial-ownership report. They still file income tax returns, and foreign entities registered to do business in the US may still have to report.
  4. Utah DAO (in force since 1 January 2024) limits members’ liability to their committed on-chain contributions. It requires a security review, a legal representative and a Utah registered agent.
  5. A Swiss or Cayman foundation needs professional set-up and local directors or supervisors, so it is cheaper overall only for large treasuries. No entity decides whether the token is a security.

MaterialsWyoming’s DAO LLC law (2021 Senate File 38) and Decentralized Unincorporated Nonprofit Association Act (2024 Senate File 50, Wyo. Stat. 17-32-101 et seq.)Utah H.B. 357 (2023), the Decentralized Autonomous Organizations AmendmentsThe Cayman Islands Foundation Companies Act (2025 Revision)The Law Commission of England and Wales, ‘Decentralised autonomous organisations (DAOs): scoping paper’ (11 July 2024)

Wonder

  1. Does forming a company or foundation protect token holders and founders from personal liability?
  2. Why do some projects use a foundation in Switzerland or the Cayman Islands rather than a US company?
  3. Does putting a DAO in a legal wrapper change whether its token is a security?

Explore

  1. Lesson 5.3.4 showed that a DAO with no legal form may be treated as a general partnership, whose partners can be personally liable for its debts. A legal ‘wrapper’ is an entity, such as a company, limited liability company (LLC) or foundation, that the law recognises as a separate person. It can sign contracts, hold intellectual property, open bank accounts, pay tax and be sued in its own name, and it usually limits members’ liability to what they put in. It does not protect individuals from liability for their own wrongful acts (lesson 5.2.7), and it does not decide whether a token is a security (lesson 3.1.1).
  2. Wyoming was the first US state to offer a DAO-specific form. Senate File 38, signed on 21 April 2021 and in force from 1 July 2021, lets a DAO organise as an LLC whose name includes ‘DAO’, ‘LAO’ or ‘DAO LLC’. It may be member-managed or algorithmically managed through smart contracts, and its articles must give a publicly available identifier of the smart contracts it uses. Members owe no fiduciary duties beyond the implied covenant of good faith and fair dealing, unless the governing documents say otherwise. It suits groups that want an ordinary LLC adapted to on-chain governance.
  3. Wyoming added a second form in 2024: the Decentralized Unincorporated Nonprofit Association, or DUNA, effective 1 July 2024. A DUNA must have at least 100 members joined by mutual consent for a common nonprofit purpose, and it may reach decisions by ‘any reasonable algorithmic means’. A person is not personally liable merely for being a member, and a judgment against the association is not by itself a judgment against its members. A DUNA may earn profits that serve its nonprofit purpose, but may not distribute them to members beyond reasonable payment for services.
  4. Utah took a different route. Its DAO Act, passed in 2023 as H.B. 357 and effective 1 January 2024, gives qualifying DAOs legal personality similar to an LLC. Conditions include deployment on a permissionless blockchain, publicly available code that has undergone a security review (lesson 5.3.5), a dispute-resolution process, a legal representative and a registered agent in Utah. A member’s liability is limited to the on-chain contributions the member has committed, but members who vote against complying with an enforceable judgment may be liable.
  5. Many large projects use foundations outside the US. The Ethereum Foundation (Stiftung Ethereum) is a Swiss non-profit foundation based in Zug, set up in 2014. In the Cayman Islands, a foundation company under the Foundation Companies Act (2025 Revision) is a company declared as such by the Registrar. It may cease to have members if its memorandum allows, provided it keeps one or more supervisors, and its objects ‘may, but need not, be beneficial to other persons’. Beneficiaries have no rights against it except those its constitution confers.
  6. Not every place sees a need for a new form. On 11 July 2024 the Law Commission of England and Wales concluded that there was no current need for a DAO-specific entity there, while noting the liability risks of operating without one. Choosing among these forms means matching legal requirements to the project’s real economics: a member floor, a ban on distributions, a registered agent or a security review may not fit. A practical check: look up a project’s claimed entity in the official register, such as the Wyoming Secretary of State’s business search, and confirm its name, status and registered agent.

Key facts

  • Wyoming’s DAO LLC law (Senate File 38) was signed on 21 April 2021 and took effect on 1 July 2021.
  • A Wyoming DAO LLC’s name must include ‘DAO’, ‘LAO’ or ‘DAO LLC’, and its articles must identify the smart contracts it uses.
  • Wyoming’s Decentralized Unincorporated Nonprofit Association Act took effect on 1 July 2024 and requires at least 100 members.
  • Utah’s DAO Act took effect on 1 January 2024 and limits a member’s liability to the on-chain contributions the member has committed.
  • A Cayman Islands foundation company may cease to have members if its memorandum allows, provided it has at least one supervisor.
  • The Law Commission of England and Wales concluded on 11 July 2024 that there was no current need for a DAO-specific legal entity.

Exercise nine, six, three, one

9CollectList up to 9 crypto projects or DAOs you know and the legal entity, if any, that each says stands behind it (some lists are shorter).
6ClusterSort them into 6 groups: US company or LLC, US DAO-specific form, Swiss foundation, Cayman foundation company, other offshore entity, and no stated entity.
3DistillReduce the 6 groups to 3: entities you could confirm in an official register, entities you could not confirm, and projects with no entity at all.
1CrystallizeWrite 1 sentence explaining what a legal wrapper protects against and what it does not.

Fact check

Dates, figures and claims checked against the published sources listed below.

Open in the interactive academy →

PT ES ZH JA KO RU DE FR MS