DAO Legal Wrapper: Wyoming and the Marshall Islands

A legal wrapper gives a DAO a corporate form recognized by law. Wyoming and the Marshall Islands solve this the same way: the DAO becomes an LLC, with its smart contract identified in the formation document. For people living in Brazil, the foreign structure does not remove Brazilian obligations.

What is a DAO legal wrapper and why does it matter?

A legal wrapper is the legal entity that "dresses" the DAO before the off-chain world. It signs contracts, hires service providers and appears as the holder of assets and accounts. Without that layer, the DAO remains a set of accounts and contracts on the blockchain, with no identified party answering for it outside the network.

Wyoming and the Marshall Islands created specific laws for this. Both start from the LLC and adapt its rules to the fact that governance can be in code. The sections below summarize what the text of each law says.

How does the Wyoming DAO LLC work?

A Wyoming DAO is an LLC whose formation document (articles of organization) declares that it is a DAO. The basis is the Wyoming Decentralized Autonomous Organization Supplement, created by provisions W.S. 17-31-101 to 17-31-116, in force since July 1, 2021 (Enrolled Act No. 73, Senate File SF0038).

Points that the text of the law includes:

• •Name: the registered name must contain "DAO", "LAO" or "DAO LLC" (W.S. 17-31-104(d)).
• •Mandatory notice: the articles or the operating agreement conspicuously state that members' rights may differ from those in an ordinary LLC and that fiduciary duties may be reduced or eliminated (W.S. 17-31-104(c)).
• •Management model: the DAO can be member managed or algorithmically managed. If nothing is stated, member management is presumed (W.S. 17-31-104(e)).
• •Smart contract on the record: the articles must include a public identifier of any smart contract used directly to administer, facilitate or operate the DAO (W.S. 17-31-106(b)). If the contract is updated, the articles must also be amended (W.S. 17-31-107).
• •Updatable contract: an algorithmically managed DAO can only be formed if the smart contracts can be updated, modified or improved (W.S. 17-31-105(d)).
• •Registered agent: the DAO maintains a registered agent in Wyoming (W.S. 17-31-105(b)).
• •Purpose: any lawful purpose, for profit or not (W.S. 17-31-105(c)).

What governance and exit rules does Wyoming law provide?

Unless the documents provide otherwise, members owe no fiduciary duty, only the contractual obligation of good faith and fair dealing (W.S. 17-31-110). A member who withdraws loses their interest and governance rights, unless the documents say otherwise (W.S. 17-31-113). The DAO dissolves, among other cases, when a year passes without approving proposals or taking any action (W.S. 17-31-114(a)(iv)).

Another point: the member has no right to inspect DAO records to the extent the information is available on an open blockchain (W.S. 17-31-112). And the Wyoming Secretary of State does not issue a certificate of authority to a foreign DAO (W.S. 17-31-116). In other words, the DAO must be formed in Wyoming; a DAO formed elsewhere cannot register there as foreign.

How does the Marshall Islands DAO work?

The Marshall Islands DAO is also an LLC. The Decentralized Autonomous Organization Act 2022 (P.L. 2022-50, of November 25, 2022, with amendments from P.L. 2023-83) defines the DAO as a resident domestic limited liability company, to be called a "DAO LLC". The 1996 LLC Act applies to the extent it does not conflict with the DAO Act.

What the official text provides:

• •For profit or not: the DAO LLC can operate for profit or not. It can register as a non-profit entity under the Non-Profit Entities Act 2020, provided it carries out non-profit activity under that law.
• •Smart contract on the record: the certificate of formation or the LLC agreement must include a public identifier of any smart contract used directly in the DAO.
• •Securities: the DAO Act says local securities law does not apply to a DAO LLC that does not issue, sell, exchange or transfer digital securities to Marshall Islands residents. It also provides that a governance token without economic rights is not a security under local law.
• •Local taxation: DAOs that do not do business in the Marshall Islands are not subject to local income tax law. DAOs that opt for the for-profit regime pay tax on gross revenue and file an annual return.
• •Beneficial owner: the DAO delivers a beneficial ownership report to the Registrar at formation and with each annual report (§712).

These rules apply only under Marshall Islands law; Brazil and the US classify the token and the DAO on their own.

Wyoming or the Marshall Islands: what differs between the two laws?

To choose between the two, compare these rules with your case: who the members are, where the DAO operates, whether there is a token with economic rights and where the bank and service providers are. For the view of a Wyoming LLC without the DAO component, see the comparison Wyoming or Delaware LLC and the jurisdiction page for Wyoming (USA).

Are DAO members protected from personal liability?

The protection comes from the LLC form, not from the word "DAO". The Wyoming Supplement applies the state's LLC Act to the extent it does not conflict with it (W.S. 17-31-103(a)), and the Marshall Islands DAO Act does the same with the 1996 LLC Act. It is in those general laws that you check the scope of limited liability. Ask a local lawyer to confirm the provision that applies to your case.

The protection also has practical limits, which the law does not eliminate:

• •poorly drafted documents, or a smart contract that diverges from what is in the articles, create conflict. In Wyoming, the smart contract prevails over the articles, except for the requirements of sections 17-31-104 and 17-31-106(a) and (b) (W.S. 17-31-115);
• •whoever manages the DAO answers for their own acts, as in any company.

If the goal is to protect assets, the DAO is only one piece. See also asset protection with an offshore trust.

How does Brazil treat a Brazilian who participates in a foreign DAO?

Brazil does not recognize or reject DAOs by name. Neither Law 14,478/2022 nor Law 14,754/2023 mentions DAOs. What counts is what the Brazilian resident holds and receives. Three fronts apply, depending on the case.

Law No. 14,754/2023 (Lei 14.754/2023), financial investments. Art. 3, §1, I includes, by way of example, virtual assets and digital wallets or current accounts with earnings among financial investments abroad. The earnings are declared on the annual adjustment income tax return, separately from other income, and taxed at a 15% rate on the annual adjustment, with no deductions (art. 2, §1).

Law 14,754/2023, controlled entity. Art. 5, §1 treats as controlled the companies "and other entities, with or without legal personality" in which the individual has the upper hand in decisions or the power to elect most of the managers, or more than 50% of the capital or of the rights to profits and assets. The controlled entity's profits are taxed on December 31 only if it is in a country or territory with favored taxation, or benefits from a privileged tax regime (arts. 24 and 24-A of Law 9,430/1996), or if its own active income is below 60% of total income (art. 5, §5). It is worth checking case by case whether a DAO with a large Brazilian stake fits that concept.

Law No. 14,478/2022 (Lei 14.478/2022) and DeCripto. Law 14,478 defines virtual asset (art. 3) and virtual asset service provider (art. 5). It regulates who provides the service, not the investor. Reporting crypto-asset transactions to Brazil's Federal Revenue Service (Receita Federal) through DeCripto is mandatory for an individual or legal entity resident in Brazil when the transactions are made on an exchange domiciled abroad or outside an exchange. The deadline is the last business day of the month following the transactions, according to the official service on gov.br. The underlying rule cited by the Receita Federal is IN RFB 2,291/2025.

If your assets abroad are large, also consult the Brazilian Capital Abroad report (CBE) on the Central Bank website, which states who must declare and when. For an overview of planning and compliance, see the tax planning and compliance services, and the article on CFC rules worldwide.

And the US side: is there a federal tax obligation for the DAO LLC?

It depends on how the LLC is classified and who its members are. The Wyoming Supplement covers the organization of the DAO, not federal tax. One example documented by the IRS: a foreign-owned U.S. disregarded entity, that is, a U.S. entity disregarded and wholly owned by a foreign person, is treated as an entity separate from its owner and classified as a corporation for the limited purposes of section 6038A, which covers U.S. companies with 25% or more foreign ownership. For them, the IRS requires Form 5472, and the instructions provide a US$ 25,000 penalty for failing to file the form on time.

This does not mean every DAO LLC fits. A DAO with several members may have a different classification, and the conclusion requires a U.S. accountant.

Can a DAO open a bank account and operate in the traditional world?

Having an LLC form does not guarantee an account will be opened. The decision belongs to each institution, and the laws of Wyoming and the Marshall Islands do not require banks to accept the DAO. See the options in offshore banking, the comparison between EMIs and traditional banks and the corporate structures page.