DAO LLCs (Marshall Islands, Wyoming): the new fund wrapper

A DAO LLC is a limited liability company designed to give a decentralized autonomous organization legal personality. Token-holders become members of the company. Smart contracts can be designated as managers, recognized in statute.

The wrapper gives participants limited liability, the ability to sign contracts, hold property, and stand as a counterparty in a court that knows what to do with it.

Two jurisdictions did most of the early legislative work. Wyoming passed its DAO Supplement to the LLC Act in March 2021, effective July 1 that year. The Republic of the Marshall Islands followed with its own framework starting in early 2022, formalized through MIDAO Directory Services.

Both DAO LLC frameworks let token governance and corporate form coexist in the same entity.

How it works

Setup is straightforward in concept. Articles of organization get filed with the registry the way they would for any LLC, plus extra fields. The articles state that the company is a DAO, name a publicly available smart-contract address, and specify whether management is by members, by the smart contract algorithm, or both.

Filing details vary by registry. In Wyoming the entity name has to include "DAO," "LLC," or "DAO LLC." In the Marshall Islands the registry sits with MIDAO and the entity is filed as a non-profit or for-profit DAO LLC depending on the structure.

In a DAO LLC, members are usually identified on-chain through the governance token. Holding the token is what makes you a member, and voting is the mechanism the LLC operating agreement points to for member decisions.

The operating agreement maps on-chain action to legal authority: a vote that passes on-chain is the same vote, in the eyes of the company, that any LLC takes by paper resolution.

The practical implication is contracting capacity. The DAO LLC can open a bank account (in jurisdictions that'll let it), enter into a master service agreement, hold legal title to assets, sue, and be sued.

Without a wrapper, the dynamic flips. The same group of token-holders is at risk of being treated as a general partnership.

That's not theoretical. In September 2022, a federal court let the CFTC serve a DAO by posting in its Discord, accepting that the unincorporated DAO could be sued and that members could be on the hook.

Why it matters

A fund needs an entity. An RWA protocol that deploys capital into off-chain assets needs more than one. The classic structure has an offshore master fund (often Cayman) holding LP subscriptions, with one or more SPVs handling the actual deployment to keep the fund's exposure clean and bankruptcy-remote.

That structure works fine for traditional credit. It breaks when the deployment side wants on-chain governance, programmatic capital allocation, or token-holder oversight.

The DAO LLC fills that gap. A protocol can place LP-facing capital in an offshore fund (familiar to institutional allocators, sound legal precedent, audit-ready) and route deployment through a DAO LLC with on-chain governance written into its operating agreement. The two entities deal with each other at arm's length.

LPs get the wrapper their compliance team won't push back on. The protocol gets the on-chain governance its token economy depends on.

The wrapper also handles the personal-liability question for governance participants. Without one, voting on a proposal that turns out badly can become a personal-liability issue if a court treats the DAO as a general partnership. With one, members get the same liability shield they'd get from any LLC.

Where this shows up

Institutional RWA protocols increasingly run on a paired structure: an offshore fund vehicle for LP capital, a DAO LLC for the deployment side, an on-chain market between them as the arm's-length bridge. It's the standard pattern.

For how that pairing works in practice and why two entities is the standard institutional setup, see The dual-fund structure: why institutional RWA protocols use two entities.