What is the legal structure of a DAO?

One way to understand DAO in our current legal context is to think about them as corporations. Although DAOs are not corporations in the real sense, they share similarities like democracy, no benefits for non-members or unknown shareholders, and a structure that works in the interest of those who work for the corporation.

In US federal law, corporations are treated as separate legal entities that are distinct from their members. Thus the assets of members of a corporation can not be used to pay off the debt of the corporation. The law also expects corporations to define the rights and obligations of their members and uphold transparency in their dealings by disclosing shareholders and investors. Like DAOs, corporations are also perpetual and continue irrespective of the decisions of some of their members to leave the structure.

Wrapped DAOs, one of the most popular structures of DAOs that have received acclaim from regulators work like a limited liability company with adjustments to remove some of the default primitive rules under the law to set up something that reflects the need of the members of the DAO. Wrapped DAOs are member-managed limited liability companies with modifications to the original rules. Aside from wrapped DAOs, there are several legal frameworks, especially in the US State of Wyoming where the first DAO, CryptoFED DAO on EOS was legally recognized. These are still subject to upgrades/updates, and the objective of this is to create a framework for normal legal procedures onchain, and only decide which onchain rule the DAO chooses to be judged by. Bill 38 which was signed into law by the State of Wyoming in April 2021 is the most pertinent document concerning the legal structure of DAOs at the moment.