The state of Utah in the United States passes a bill granting independent legal status to DAOs

Starting from January 1, 2024, the state of Utah in the United States will officially implement a landmark bill that grants decentralized autonomous organizations (DAO) independent legal status. The bill, known as the "Decentralized Autonomous Organization Amendment," H.B. 357, passed with a narrow margin after intense discussions, marking the legal recognition of DAO as an organizational form in the United States.

Previously, DAOs typically needed to rely on existing legal entity forms, such as limited liability companies (LLCs), foundations, special purpose trusts, or cooperatives to operate and gain legal protection. For example, the DAO bill passed in Wyoming in 2021 incorporated DAOs into the LLC management system. However, this new bill in Utah allows DAOs to be legally recognized as an independent organizational form without the need for entity packaging.

The bill clearly stipulates the organizational status, formation conditions, member definitions, and responsibilities of the DAO.

1. Organizational Status and Responsibilities:

   • The DAO has legal person status and can engage in any lawful activities.
   • DAO is a limited liability entity, with liability capped at its total assets.
   • Individual members generally do not bear liability unless the DAO does not comply with legal judgments.

2. The Formation of DAO:

   • A natural person is required as the registrant and a public contact must be set.
   • Must establish the organization's articles of association.
   • Should be deployed on a public blockchain, with a decentralized governance system, open-source code, and public addresses.
   • An authorized legal representative must be established to handle off-chain affairs.

3. Definition of Members and Responsibilities:

   • DAO has no managers; all members are considered co-managers.
   • Governance token holders are regarded as DAO members.
   • Members may not demand the dissolution of the organization on the grounds that the DAO cannot refund funds.
   • In terms of taxation, it is executed as a partnership by default, but the corporate form of taxation can be chosen through voting.
   • In a partnership structure, the DAO can distribute profits to its members, who pay personal income tax as partners.

It is worth noting that the bill also provides specific provisions regarding hard forks that may occur in blockchain networks, reflecting its professionalism and practicality. As more and more DAO businesses enter deeper waters, this bill from Utah provides a compliance framework for DAOs, which is expected to promote further development and regulation of DAOs.