Why You Must Incorporate
Despite our pseudonyms, PFPs + anonymity, we are still governed by off-chain laws + regulations. doesn't matter if you are a DAO, a decentralized platform or anonymous entity.
In many jurisdictions, DAOs without legal entities are presumed to be a general partnership with unlimited joint/several liability. definitely not a good thing.
These are some reasons why you must incorporate:
1) limited liability - web3 is risky stuff. it is advised you setup a limited liability entity to protect your personal assets + avoid being held personally liable for the activities of your business. this won't protect you in all circumstances but at a minimum, it is a good idea.
2) the ability to enter agreements + contract - you must have a legal entity to be able to enter agreements + bind your company + others to contractual agreements. web3 trust can only take you so far.
3) investability - in exchange for capital, investors expect some legal assurance that their investment is in an actual company that holds value. in exchange for capital, web3 startups often issue shares, tokens, convertible-debt etc..
4) IP protection - protecting your intellectual property by assigning it into a company also ensures that your IP can be monetized/licensed. if you do not assign/protect your IP into your company, it is likely not investable as it is unclear who owns the valuable IP.
5) governance - whether you are a DEX, a DAO, a NFT project, you need clear governance to manage your project + make decisions.
6) tax reasons + regulatory reasons - not every jurisdiction is crypto/token/DAO friendly. setting up a legal entity allows you to setup in more favorable jurisdictions + potentially benefit from preferential tax treatment.
there are many other reasons why setting up a legal entity is a good idea and numerous other considerations when issuing tokens, NFTs and setting up DAO wrappers but that's for another day another post.
most web3 companies will require 2-3 companies in multiple jurisdictions to make an attempt at complying with security/regulatory laws.
Going forward, the need for education/knowledge/compliance will escalate as many jurisdictions begin to tighten up the regulatory around this emerging space.
Disclaimer:
This website only provides educational and informational content and does not provide legal advice. You are not to rely on this information and should contact a lawyer for their professional advice. There is no solicitor-client relationship with Meta Law until you have been formally retained in writing.
