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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Who owns the LLC? do you think a tax-exempt Duna is inferior to this structure in any dimension?

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A DAO LLC be adjusted to however the Nouns foundation wants to create its governance. Some DAO LLC are completely decentralized while others will implement a council of managing members. At the end of the DAO the DAO LLC is owned by its members in this case governance token holders. I think both have pros and cons, but given the conversation I’ve seen in this channel. I tried to use the thread to show how the DAO LLC may be more viable and a reasonable alternative to the DUNA. I believe it should at least be considered as an option.

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Asked bc post said beneficial owners kyc

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Ahh yes, beneficial owners are defined as anyone with 25% or more of governance or voting rights. If none, any managers of the DAO LLC. If none of the above, the just one member will need to KYC.

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So the 1 member is the only beneficial owner? Help me understand, for example, what happens if there are inquiries or enforcement actions. Seems like a high-risk position? Very different from a duna admin would you agree?

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I'd assume that no member in Nouns would meet the criteria of 25% ownership. So, if the DAO wanted to nominate managing members, they would be considered UBOs. Still, for the first time, with a DAO LLC, a legal entity isn't required to have managers of any kind. Managing Members get day-to-day management rights, signatory authority, etc. If Nouns wanted to keep a "board structure" they could mimic this structure using managing members. There is no additional legal liability placed by the RMI on UBOs, Managing Managers, or Members of a DAO LLC unless its Operating Agreement explicitly provides for additional liability on these individuals. That said, some countries may have laws that require residents to face liability for being beneficial/controlling members of foreign companies, so local laws or lawyers should be consulted as needed. In Cayman (not sure about DUNA), there are special responsibilities and liabilities placed on directors or similar positions, whereas the RMI DAO LLC doesn't have this.

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