A decentralized autonomous organization (DAO) is an emerging form of legal structure that has no central governing body and whose members share a common goal to act in the best interest of the entity. Popularized through cryptocurrency enthusiasts and blockchain technology, DAOs are used to make decisions in a bottom-up management approach.
decentralized structure, transparency, and automated operation
The decentralized nature and culture of Web 3 encourages greater levels of participation across stakeholders, though this is not formally baked into the legal structure and must be explicitly designed in the smart contracts.
On chain governance proposals, consensus mechanisms, decentralized voting,
Web 3 culture has participation.
DAOs are a young and more novel entity native to the Web 3 space, so this structureās staying power is still yet to be proven.
DAOs function like a for profit entity, like an LLC, under no single personās control through a multi signature wallet.
No inherent working equity provisions defined in this legal structure.
The IRS has not yet defined how profits of DAOās will be taxed at the legal entity-level. This inserts uncertainty and speculation to the long term impact of choosing this structure.