CHAPTER 11: THE BEST OF BOTH WORLDS?

Balancing the Utah DAO with a Swiss Corporate Entity

Imagine a group of DAO founders based in Switzerland, eager to build an organization that aligns with their decentralized vision while enjoying liability protection for members. However, they wish to avoid the high costs and administrative complexity of establishing a Swiss foundation. Instead, they explore combining the innovative Utah DAO LLC framework with a traditional Swiss corporate entity, achieving liability protection and operational synergy within their home country.

This section examines how Swiss founders can leverage Utah’s DAO LLC structure for decentralized governance and liability protection while incorporating a Swiss GmbH or AG to manage non-DAO functions, such as treasury operations, compliance with local regulations, and regional partnerships.

What the Utah DAO Brings to the Arrangement

  1. Decentralized Governance: Utah's DAO LLC framework enables governance through smart contracts, removing the need for traditional hierarchical structures.

  2. Cost-Effective Setup: Utah offers low filing fees and minimal capital requirements, making it accessible to a wide range of DAOs.

  3. Ease of Compliance: The streamlined registration process ensures simplicity for ongoing compliance.

  4. No Residency or Physical Presence Requirements: Founding teams do not need to be U.S. citizens or residents to register and maintain a Utah DAO. Furthermore, there is no requirement to have a physical office or staff in the U.S., eliminating additional expenses. The Utah DAO statute requires only a registered agent who resides in Utah or is authorized to conduct business in the state. This agent can be a hired service, costing as little as $50 annually, to receive notices and official communications on behalf of the DAO.

What Swiss Corporate Entities Bring to the Arrangement

  1. Local Incorporation: Establishing a Swiss GmbH or AG allows the organization to maintain a strong presence in Switzerland while adhering to local regulations.

  2. Global Credibility: Swiss entities are globally recognized for their stability and governance standards.

  3. Cost Efficiency for Corporations: A Swiss GmbH requires a minimum capital of CHF 20,000 (approximately $21,000 USD), compared to the CHF 50,000 (approximately $52,000 USD) required for foundations. GmbHs also face fewer supervisory requirements, reducing administrative costs.

  4. Operational Flexibility: Swiss GmbHs or AGs can manage treasury functions, hold assets, and handle non-DAO-related business operations seamlessly.

The Hybrid Model

By merging these structures, founders can capitalize on the strengths of each jurisdiction:

This hybrid model ensures that the DAO’s decentralized ethos is maintained while enabling operational scalability and credibility within Switzerland.

Challenges to Consider

  1. Increased Complexity: Operating in multiple jurisdictions requires careful coordination of legal, tax, and compliance obligations.

  2. Cost Considerations: While the Utah DAO LLC minimizes costs, maintaining two entities adds its own unique expenses that must be factored into the operational budget.

  3. Regulatory Alignment: Ensuring compliance with AML/KYC standards (if applicable) and other international regulations is crucial to mitigate risks.

Conclusion

For Swiss founders, integrating Utah’s DAO LLC framework with a Swiss corporate entity offers a compelling way to achieve liability protection and decentralized governance without the rigidity and costs of a foundation. This approach preserves the decentralized vision of the DAO while maintaining a strong operational presence in Switzerland, enabling the organization to thrive both locally and globally.

Moreover, this model can be adapted for other international founding teams. By establishing the Utah DAO for decentralized governance and liability protection in DAO-specific activities, while managing all other corporate operations via their domestic statutes or jurisdictions of choice (e.g., the UK), teams can effectively balance global innovation with local compliance. This flexible approach allows DAOs to leverage the strengths of multiple jurisdictions to meet their unique needs.

Chapter 11 Key Takeaways:

  1. Combining Utah’s DAO LLC framework with a Swiss corporate entity allows DAO founders to achieve liability protection, decentralized governance, and operational flexibility.

  2. Founding teams do not need to be U.S. residents or maintain a physical office in the U.S. to leverage Utah’s DAO framework, significantly reducing costs.

  3. Using a Swiss GmbH or AG alongside a Utah DAO creates a synergistic model that balances the strengths of both jurisdictions, enabling DAOs to maintain local compliance while benefiting from global credibility.