Leo on Warpcast

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Hey Nouns, Recently, I’ve taken an interest in following this channel and commenting on various posts due to my work with legal entity solutions at @midao. Since then, @thethriller and I have spoken to a few Nouns members about our offering, and they recommended we post here for total clarity and to potentially provide some insights. Before I begin, I want to be fully transparent and upfront with everyone as a sort of “disclaimer.” I’m biased—strongly so. I believe the Marshall Islands DAO LLC is the best entity to incorporate a DAO, which is why I work at MIDAO. Furthermore, I’m not a member of the Nouns, nor is anyone on our team. We may not have all the details or context compared to DAO members, but based on the discussions I’ve seen in this channel, I’d like to provide additional information about MIDAO.

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The main points that came up in discussions I had with Nouns members or comments I saw on this channel can be categorized into four bullet points. There are many other pros/cons worth referencing, but I'm trying to distill the conversation without being reductive. I think @noun40 does an excellent job of also breaking down these points in his thread on the DUNA, which is well-written and presents a compelling case. Please read @noun40's thread here: https://warpcast.com/noun40/0x6eb6498b; I'll reference it throughout this thread, where I discuss the four bullet points in the casts below.

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1. KYC'ing Grantees: This seems to be the most-mentioned pain point for the DUNA structure that's come up in all my conversations with Nouns in the past few days. Again, @noun40 does a great job explaining in his thread (linked above). From what I've learned from that thread and my own research, it appears there would be stricter KYC regulations if the DAO had an entity based in Wyoming compared to an offshore jurisdiction. Still, it may be prudent for Nouns to implement KYC for all grantees, regardless of their incorporation location, as a compliance measure. If strict KYC remains a significant concern, here's what I've shared with current Nouns members about the Marshall Islands policy: Continued...

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“Whenever any organization pays or grants money, it must adhere to any filing requirements that might exist in the local jurisdiction of the receiving party or entity. However, organizations based in the United States and some other jurisdictions also have requirements (from the IRS, in the case of the United States) that apply every time a payment or grant exceeds a certain amount. RMI DAO LLCs and other offshore entities do not have similar filing requirements for payments or grants, so they typically have to make far fewer filings than US-based organizations. Note that every company in the world (including RMI DAO LLCs) has a legal obligation not to engage with counterparties on international (e.g., United Nations) sanctions lists, but how they enforce that requirement is up to them.”

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2. Member Liability/Anonymity/Voting: Again, @noun40 does a great job explaining the DUNA's benefits in this area (thread linked above). In summary, the DUNA is an excellent entity for removing member liability while preserving privacy and ensuring that Nouns NFTs won't be classified as securities. On the RMI DAO LLC side, membership functions similarly. Non-profit DAO LLCs are legally allowed to issue governance tokens or NFTs to define and track membership, providing NFT holders with limited liability. Furthermore, these non-profit governance tokens are not considered securities in the Marshall Islands, and token holders won't need to KYC unless they become Ultimate Beneficial Owners of the DAO. The advantage here is that in the RMI, you enjoy the same benefits regarding tokens/NFTs as the DUNA while remaining in an offshore crypto-friendly jurisdiction.

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3. Tax Points - Reducing Tax Risks - Paying Taxes in the US: This is likely the most compelling case for the DUNA vs RMI DAO LLC. It appears that the DAO currently conducts most of its business in the US, which can make it more straightforward from a tax perspective to have an entity based in the US as well. However, DUNAs are taxed as for-profit companies, whereas RMI non-profit DAO LLCs are entirely tax-free. Additionally, creating a US-based legal entity increases legal nexus in the United States. This legal nexus can create additional compliance requirements and risks compared to offshore jurisdictions.

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4. Precedent (referenced here: https://warpcast.com/bradq/0xcc050a80): While I haven’t seen this point discussed as frequently, I think it’s still relevant. Nouns would be one of the first DUNAs. While it’s exciting to be an early adopter, there are already over 200 RMI DAO LLCs, including two “Nouns-builder” DAOs, /Purple and /VRBS. We’ve also worked with other DAOs active on Farcaster, like Tokyo DAO, /Idriss, and /ottodao. The point is that the Marshall Islands has worked diligently to establish itself as the most stable, DAO-friendly place to incorporate in the world. Since 2021, the RMI has passed three pieces of “DAO-specific” legislation and new DAO regulations in 2024 to provide further clarity and an accelerated registration process. Furthermore, the RMI government is broadly pro-crypto; you can find more on this in this Balaji podcast: https://thenetworkstate.com/episode/cryptoislands.

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