Liabilities in Setting Up a DAO

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

DAOs or Distributed Autonomous Organizations bring people together to pursue a common goal.

Here are some liabilities in setting up a DAO:

Traditional companies use a corporate hierarchy for defining the company and making decisions.

Decisions are made by the leadership and people within the organization execute those decisions.

DAOs are network organizations that use software code in the form of smart contracts to execute decisions and track the results on the blockchain.

DAOs use a voting mechanism with its members to make decisions and determine policies.

Traditional corporations limit the liability of its leadership and employees.

DAOs are unincorporated partnerships that provide no such protection.

In most DAOs, the members are anonymous which complicates KYC/AML requirements for financial institutions.

DAOs should consider registering as a legal entity to gain such protection.

Each state treats DAOs differently as unincorporated entities.

Look for a state or country offering recognition of DAOs as an entity to register your DAO

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