How to Form a DAO LLC in Wyoming

Forming a Decentralized Autonomous Organization (DAO) LLC in Wyoming presents a unique opportunity to combine the benefits of a traditional LLC with the automation and transparency of decentralized management.

Powered by code and smart contracts, these entities are helping usher in a new era of blockchain-native business. Here’s everything you need to know about DAO LLCs, and how to get yours off the ground in Wyoming.

What is a Wyoming DAO LLC?

A DAO LLC, simply put, is a legal business entity that runs on digital programs and code instead of a traditional management structure. Wyoming became the first state to formally recognize DAO LLCs as legal entities and begin regulating them through the passage of WY SF0038 in 2021.

Smart contracts, self-executing code designed by the DAO’s organizers, control how the entity operates, and can automatically execute tasks, enforce rules, and handle routine maintenance. This allows DAO LLCs to operate without constant, direct oversight. DAOs aren’t entirely autonomous, however; members vote on big-picture changes, like rewriting rules or managing funds, using special digital governance tokens granted to them upon formation.

Some examples of a DAO include:

• NFT communities that vote on how to use shared funds
• Crypto investment clubs managing and trading digital assets
• Decentralized finance (DeFi) protocols, like Venus Protocol, that automate finance solutions like lending and borrowing

DAO LLCs operate differently from other more traditional business structures, but they still have the same rights as other entities in Wyoming. This means they can own assets, enter into contracts, and even take legal action.

Difference between DAO and an LLC

Traditional Wyoming LLCs share a lot in common with DAO LLCs, including formal legal recognition and flexible internal governance. Here’s how the two differ in terms of governance and structure:

The bottom line: while both LLCs and DAO LLCs offer liability protection, DAO LLCs replace a typical management with automated, code-driven governance.

Why form a Wyoming DAO LLC?

For companies wishing to ditch traditional management that comes with an LLC, the DAO LLC blends the flexibility and liability protection benefits of a standard LLC with the self-governing power of a DAO’s blockchain-based smart contracts, allowing for collective decision-making without central leadership.

This structure lends itself well to modern, blockchain-native projects, crypto or domain investment collectives, and other industry-disrupting ventures that value transparency, automation, and collective decision-making.

Ready to form your Wyoming DAO LLC? State filings can be tricky, and it helps to have a subject expert in your corner. Hire us to register your business. Our pros can handle the paperwork while you handle the code.

Steps to Forming a DAO in Wyoming

While a DAO LLC operates with a non-traditional management structure, the process of forming one in Wyoming closely mirrors the steps for forming a standard LLC. The few key differences are directly addressed by the Wyoming Secretary of State, which has published guidance to answer the most frequently asked DAO questions.

Here’s what you’ll need to do to get your DAO officially registered in Wyoming.

Step One. Name your LLC

Like any LLC, a DAO LLC needs a unique name. According to W.S. 17-29-108, your name must:

• Include entity-specific terms: your name needs to include DAO and some variation of LLC, L.L.C., or Limited Liability Company
• Not include any confusing terms that conflict with the business purpose (for example: nonprofit or corp in the name of a for-profit LLC)
• Not be confusingly similar to any registered trademarks (Coca Cola DAO LLC isn’t going to fly)

You can run a Wyoming name search for free online, and even reserve your business name for 120 days by filing a Wyoming LLC Application for Reservation of Name.

Step Two. Get a Wyoming registered agent

Your DAO LLC will need to appoint a Wyoming registered agent before it can register with the Wyoming Secretary of State. Your registered agent can be an individual or a company, and they do not need to be a member or organizer of your DAO to be appointed.

However, your registered agent provides the state with a legal point of contact, and they must be available during standard business hours to accept legal documents, such as service of process. DAO LLCs without a Wyoming office can also use their registered agent’s address on formation documents as their physical location, so long as the agent consents.

Step Three. File your DAO Articles of Organization

Once you’ve chosen a name and appointed a registered agent, it’s time to make your business official. Wyoming has drafted Articles of Organization specifically for DAOs. This document is used to register an LLC, with revisions specific to DAO LLCs, including a new field to collect the public identifier of any smart contracts used to manage the entity, and disclosure of whether your DAO LLC will be algorithmically managed or member managed.

The fee to file your DAO Articles of Organization is $100, and it can take up to 15 days to be processed by the state.

Step Four. Draft an operating agreement

Smart contracts define the rules of your LLC and ensure they are followed, but keeping an internal operating agreement for your DAO is still good practice, as it outlines (in writing) how your organization operates and details your governance protocols and processes.

A Wyoming operating agreement isn’t a state requirement for any LLC, and you won’t be filing it with the Wyoming Secretary of State, but it can help to supplement the smart contracts designed to manage your DAO LLC, or fill in blanks if your smart contracts omit some nuance. You can read more details on the DAO operating agreement section of WY. Stat. § 17-31-108.

The Flexibility of the LLC

Wyoming’s recognition of DAO LLCs highlights the continued relevance and flexibility of the LLC structure. As one of the most accessible and flexible business structures, LLCs are a popular entity type for a reason. The DAO LLC stretches those benefits even further by layering in blockchain-based autonomy, offering decentralized projects the legal legitimacy of more traditional businesses.

In Wyoming, a state renowned for its privacy-friendly statutes and business-forward infrastructure, a DAO LLC provides a structure through which to innovate, along with the legal footing to scale.