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DAO Legal Structure

Does Georgia have a specific "DAO Law" like Wyoming?

No, Georgia does not yet have a specific legislative act dedication to DAOs. However, the Georgian "Law on Entrepreneurs" allows for flexible corporate structuring. We utilize existing forms like LLCs or Non-Commercial Entities and customize their charters to recognize blockchain governance, effectively creating a valid legal wrapper under current laws.

How can a DAO legally hire employees?

A DAO protocol cannot sign an employment contract. By registering a legal entity (the wrapper), the DAO gains the ability to enter into formal labor or service agreements with developers, marketers, and community managers. This ensures compliance with labor laws and allows for fiat salary payments including tax handling.

What is a "Token-Warranted" structure?

It is a mechanism where ownership of a governance token grants the holder rights equivalent to membership in the legal entity. Since Georgian registry requires identifying shareholders, we often use a "Trust" or "Foundation" model where the legal entity acts as a trustee for the fluctuating group of token holders, minimizing the need to constantly update the public registry.

How are taxes handled for a DAO in Georgia?

Taxation depends on the chosen legal form. An LLC is subject to the "Estonian Model" (15% tax only on distributed profits), which is ideal for DAOs that reinvest treasury funds. A Non-Commercial Entity (NNLE) is exempt from profit tax on grants and donations but is taxed on commercial income. We structure the entity to optimize tax efficiency based on your revenue streams.

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Decentralized Autonomous Organizations (DAOs) represent a new era of digital governance, where organizational rules are written in code and decisions are made collectively. However, to operate in the physical world — whether signing contracts, opening bank accounts, paying taxes, or protecting intellectual property — a DAO needs a legal form. A "Legal Wrapper" is a legal structure that bridges the decentralized protocol with the traditional legal system. Georgia, with its flexible corporate legislation and crypto-friendly environment, is becoming increasingly attractive for DAO registration, although this process requires deep legal analysis and proper structuring.

What Does the DAO Legal Structuring Service Cover?

This service involves selecting and implementing the optimal corporate form for the DAO, protecting its members, and enabling legal operations. The service includes:

  • Selection of Legal Form: Analysis of the best form for a specific DAO — Limited Liability Company (LLC), Non-Entrepreneurial (Non-Commercial) Legal Entity (NNLE), or another structure.
  • Charter Adaptation: Drafting a "hybrid" charter that recognizes blockchain-based voting (On-chain Governance) and links it to official decisions of the legal entity.
  • Token-Warranted Structures: Creating mechanisms where token ownership grants membership or voting rights in the legal entity (considering Georgian legislative restrictions).
  • Treasury Management Legalization: Formalizing the legal ownership of the DAO's digital assets (Multisig wallets) under the created company.
  • Off-chain Relations: Preparing contracts for service providers, developers, and employees.
  • Tax Structuring: Developing a tax model for the DAO's income based on the chosen legal form.

Common Real-World Scenarios

DAO legal structuring is essential in the following cases:

  • When an Investment DAO wants to purchase real assets (e.g., real estate or startup equity) and needs a legal entity for property registration.
  • When a Protocol DAO collects fees and needs to legalize this income and pay taxes to avoid being qualified as "illegal entrepreneurial activity."
  • When a Charity DAO collects donations and wants to issue grants through the official banking system.
  • When a group of developers wants to protect themselves from personal liability, as an unregistered DAO may be considered a general partnership where members are liable with all their assets.
  • When a DAO plans to launch its own token and wants to minimize legal risks (securities regulations).

Georgian Legislation and Regulations

In Georgia, the Civil Code of Georgia and the Law of Georgia on Entrepreneurs are primarily used for DAO structuring. For commercial purposes, a Limited Liability Company (LLC) is most often created, allowing for limited liability of members. For non-profit or social purposes, a Non-Entrepreneurial (Non-Commercial) Legal Entity (NNLE) is used. The main challenge is that Georgian legislation does not yet directly recognize a "token" as an equivalent to a share in the Public Registry. Therefore, lawyers create complex contractual constructions (e.g., options, shareholders' agreements) that give legal force to smart contract outcomes. Also relevant is the Law on Facilitating the Prevention of Money Laundering and Terrorism Financing, which requires the identification of beneficial owners, posing a challenge for anonymous DAOs.

Service Process

Working with Legal.ge specialists involves the following stages:

  1. Goal Analysis: Determining the DAO type (investment, service, social) and objectives.
  2. Jurisdictional Comparison: Assessing Georgia's advantages compared to other popular jurisdictions (Wyoming, Switzerland).
  3. Structure Design: Selecting the optimal "Legal Wrapper" (LLC, Foundation, Association).
  4. Document Drafting: Preparing the charter, shareholders' agreement, and token holders' rights document.
  5. Registration: Registering the legal entity with the Public Registry and the tax authority.
  6. Banking Support: Attempting to open a bank account or finding alternative fintech solutions.

Why Legal.ge?

DAO structuring requires deep knowledge not only of corporate law but also of blockchain technologies. Traditional lawyers often fail to grasp the principles of decentralization. On Legal.ge, you will find Web3-oriented lawyers who understand how smart contracts work and can create a legal structure that protects the decentralized nature of the DAO while ensuring compliance with the law.

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