DAO LLC Formation Checklist: Before You File

If you’re starting a DAO and want to make it legally recognized, a DAO LLC is one of the first things to consider. States like Wyoming and Utah offer crypto-friendly rules that make it easier to give your DAO a real-world structure. Here’s what you need to know before you register.

TL;DR (Quick Summary)

• DAO LLCs give your project legal recognition and protect contributors from personal liability.
• Wyoming and Utah are the top states offering specific DAO LLC legislation.
• You’ll need to draft two key documents: Articles of Organization and an Operating Agreement.
• Check if your token model could trigger securities or AML issues.

Step-by-step: What to Do Before You File

1. Do You Even Need an LLC?

If your DAO handles funds, ships products, or grows beyond a casual community, you’re exposing contributors to personal legal risk. Without a legal wrapper, your DAO could be treated as a general partnership: meaning unlimited liability for everyone involved. A DAO LLC provides limited liability protection and creates a bridge between your on-chain activity and the off-chain world of contracts, banking, and operations.

2. Pick the Right State

As of 2025, two states in the U.S. explicitly support DAO structures:

• Wyoming – the first to recognize DAO LLCs and allow smart contract-based governance to be legally binding.
• Utah – offers a “Limited Liability Decentralized Autonomous Organization” (LLDAO) structure with unique statutory flexibility.

Both allow you to embed smart contract logic into your governance, and reference it directly in your formation documents. While both are DAO-friendly, they differ slightly in how much flexibility and formality they require: review both statutes or consult legal help to choose the best fit.

3. Draft the Core Legal Docs

You’ll need two core documents:

• Articles of Organization – the public document filed with the state to formally register your DAO LLC
• Operating Agreement – the internal “constitution” of your DAO that defines how it functions

Unlike traditional LLCs, a DAO’s Operating Agreement isn’t just about ownership percentages and manager roles. It often includes:

• Token-based governance (1 token = 1 vote or quadratic voting, etc.)
• On-chain decision-making processes (e.g. proposal submission, quorum rules)
• Automated execution via smart contracts
• Role-based permissions and contributor pathways
• Logic for dispute resolution: both on-chain and off-chain

This is one of the most important documents for a legally recognized DAO. Even if your state doesn’t require a detailed agreement, investors and contributors will expect clarity on how power and tokens flow.

If you have any treasury held in multisig or smart contracts, it’s good practice to reference them directly and explain their legal relationship to the LLC entity.

4. Address Smart Contract Integration

If your DAO runs on-chain (e.g. using Gnosis Safe, Snapshot, or custom smart contracts), consider how your contracts interact with your legal structure. Some questions to cover in your documents:

• Who controls the deployment keys or multisig wallets?
• Are contract functions automated based on governance votes?
• Is the DAO Treasury directly tied to the LLC?
• How are contributors granted roles — and are those rights enforceable off-chain?

States like Wyoming allow you to declare a “smart contract address” as the governance system. In practice, this means you can anchor your DAO logic in Solidity — but you still need to make the legal docs and human-readable governance terms reflect what's happening on-chain.

5. Handle Legal Compliance

Even if your DAO is autonomous, it’s still subject to U.S. law. Some key areas to consider:

• Securities Law — If your tokens can be traded or have speculative value, assess them under the Howey Test. Not all tokens are securities, but many risk being classified as such.
• Taxation — DAO LLCs can choose to be taxed as disregarded entities, partnerships, or C-corps. Token income, contributor compensation, and treasury inflows can trigger reporting.
• AML/KYC — If your DAO interacts with fiat or user data (e.g. via fiat on-ramps or grants), you may trigger anti-money laundering obligations.

Legal gray areas still exist, but being proactive on compliance can help you avoid regulatory friction down the line.

Final Thoughts

Forming a DAO LLC is a smart move if you’re serious about building something that lasts. It helps protect your team, adds legitimacy when dealing with partners or banks, and makes governance more predictable. But it also comes with responsibilities like filing paperwork, staying compliant, and thinking through your legal structure in detail.

If you’re unsure about any of the steps, it’s worth talking to a lawyer who understands Web3. Better to get it right the first time than untangle legal problems later.