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April 18, 2023

Exploring the Marshall Islands DAO LLC: A Revolutionary DAO Legal Structure

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Exploring the Marshall Islands DAO LLC: A Revolutionary DAO Legal Structure

 

Introduction

The Republic of the Marshall Islands (RMI) is swiftly becoming a global frontrunner in offering a favorable jurisdiction for registering Decentralized Autonomous Organizations (DAOs) with its innovative Marshall Islands DAO LLC legal structure. This blog post delves into the various advantages, regulatory framework, and compliance requirements surrounding RMI DAO LLCs, simplifying the understanding of this groundbreaking Decentralized Autonomous Organisation LLC model for businesses and entrepreneurs.

The Allure of RMI DAO LLCs

The Marshall Islands DAO LLC presents numerous benefits for DAOs, including:

  1. Limited liability for members, safeguarding their personal assets from the organization’s liabilities.
  2. Corporate personhood, enabling the DAO LLC to own property, sign contracts, open bank accounts, and function as a tax entity.
  3. Absence of trustees, directors, officers, or managers with additional liability or responsibility.
  4. Permission to maintain all documents and records on the blockchain.
  5. The possibility for most members to remain anonymous.
  6. Legal allowance for governance by smart contracts within the DAO legal structure.

Non-profit vs. For-profit Marshall Islands DAO LLCs

Non-profit Decentralized Autonomous Organisation LLCs in the RMI are designed with no economic owners, meaning they cannot distribute earnings to their members. Instead, these entities have beneficial members who participate in the organization’s governance. Non-profit DAO LLCs enjoy tax exemptions, with no taxes levied on the organization itself, and no pass-through taxes on their members.

For-profit Marshall Islands DAO LLCs, conversely, operate as revenue-generating entities. They are subject to a 3% Gross Revenue Tax (GRT) on their earned revenue, which encompasses interest payments but excludes capital gains and dividends. It’s crucial to note that for-profit DAO members may be subject to additional taxes in their local jurisdictions.

Relationship with the United States

Although the RMI is a sovereign nation not under US jurisdiction, many of its laws, such as corporate laws, are based on Delaware laws. RMI courts may refer to Delaware case law in situations where no applicable statute or case law exists in the RMI.

Digital Asset Regulations

Currently, there are no digital asset, token, or protocol-related laws or regulations in the RMI, except for companies that engage in the custody of digital assets on behalf of others. The RMI plans to introduce innovative, tech-forward legislation and regulation over time, which will apply to digital assets, tokens, and protocols.

Why Choose the Marshall Islands?

The RMI has been a global leader in shipping company jurisdictions for over five decades, with over 40 public companies traded on NASDAQ and NYSE and companies representing over 20% of the world’s shipping capacity incorporated there. Building on this success, the RMI now aims to become the leading global jurisdiction for Decentralized Autonomous Organisation LLCs.

Compliance

The RMI is dedicated to following international standards regarding beneficial ownership. DAO members with 25%+ governance rights in DAO LLCs must complete Know Your Customer (KYC) procedures, providing their real name, address, and passport information. Additionally, on-chain activity will be monitored for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) purposes. Notably, the RMI is not part of any blacklists or tax evasion lists.

Annual Reporting

RMI DAO LLCs must report annually by updating their company agreement and having beneficial members complete KYC. For-profit entities must report their revenue for tax collection purposes.

Banking for DAOs

RMI DAO LLCs have successfully opened bank accounts with a number of financial institutions.

Conclusion

The Republic of the Marshall Islands offers an unparalleled and attractive environment for Decentralized Autonomous Organizations by providing a unique legal structure through the Marshall Islands DAO LLC. By catering to both non-profit and for-profit organizations, RMI DAO LLCs present a flexible, compliant, and innovative solution for DAOs seeking a supportive jurisdiction. As the world of decentralized organizations continues to expand, the RMI is poised to remain at the forefront of this transformation, making it a top choice for entrepreneurs and businesses exploring the potential of Decentralized Autonomous Organisation LLCs.

How we can help?

Reach out to us at Cavenwell to discuss your DAO’s unique requirements and explore how the Marshall Islands DAO LLC or other DAO legal structures can benefit your organization.

 

The content of this insight is of an educational nature and is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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