Utah passes DAO bill, granting it independent legal status

The Utah State Legislature passed the "Decentralized Autonomous Organization Amendment" (H.B. 357) on the afternoon of March 1, a milestone decision that marks the legal recognition of DAO as a unique form of organization in the United States.

Previously, DAOs typically needed to operate through existing legal entity forms, such as Limited Liability Companies (LLCs), foundations, special purpose trusts, or cooperatives. However, this legislative breakthrough has made the DAO itself an independent legal entity, no longer requiring the "shell" of other organizational forms.

The new bill clearly defines the organizational status, member responsibilities, and operational methods of the DAO:

1. Legal Status and Responsibilities:

   • DAO is granted legal person status and can carry out legal activities.
   • DAO is a limited liability entity, with liability capped at its total assets.
   • Individual members usually do not bear responsibility, unless in specific circumstances.

2. Requirements for the establishment of a DAO:

   • A natural person must be the registrant and public contact.
   • Must establish the organization's articles.
   • Must be deployed on a public chain, implement decentralized governance, and ensure the code is open source.
   • A designated authorized legal representative is required to handle off-chain matters.

3. Definition of Members and Responsibilities:

   • All members are regarded as co-managers.
   • Governance token holders are recognized as DAO members.
   • Members shall not request the dissolution of the DAO on the grounds of irretrievable funds.

4. Taxation and Distribution:

   • The default tax method is based on a partnership model, but the company tax model can be selected through voting.
   • Allow distribution of profits to members in a partnership manner.

It is worth noting that the bill also stipulates technical details such as blockchain hard forks, reflecting the legislators' in-depth understanding of blockchain technology. This bill provides an important legal framework for the compliant operation of DAOs, and is expected to promote the application of DAOs in a broader range of business fields.

The bill will officially take effect on January 1, 2024, and is expected to have a profound impact on the development of DAO.