🛡 Create a legal entity for Purple 🛡
Proposal by @cojo.eth (Colin Johnson) & @thethriller (Adam Miller)
Tl;dr
This proposal aims to establish a legal wrapper for Purple, creating a robust legal structure to protect members, enable larger grants, and attract more token buyers.
Summary
Currently, Purple operates without a formal legal structure, which poses several risks and limitations. By creating a legal wrapper, we can protect our members from individual legal & tax liability, qualify for substantial institutional grants, and appeal to high net worth individuals. The proposal suggests forming a Marshall Island DAO LLC through MIDAO, which offers cost-effectiveness, flexibility, and minimal administrative burden. This structure requires no centralization of power or significant action from DAO members.
Rationale
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Member Protection: A legal wrapper shields members from individual legal & tax liabilities in legal matters, safeguarding personal assets.
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Grant Eligibility: As a nonprofit public goods DAO, Purple stands to benefit significantly from institutional grants, which require a clear legal entity for fund transfer.
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Enhancing Membership Appeal: A legal wrapper reduces risk for potential high net worth or regulatory-conscious token buyers, thereby expanding our treasury capabilities.
Proposed Entity
The choice of a Marshall Island DAO LLC aligns with our needs for cost, flexibility, and minimal administrative burden. This structure has been vetted against various other forms like 501c3s, LLCs, and is found to be most advantageous for our scenario.
Impact on Members
This change does not alter member rights or responsibilities. Voting remains on-chain, and the selection of a figurehead for organizational contact purposes does not confer any special powers or responsibilities. This proposition really just provides legal protection for members without any substantial change in day to day activities.
Precedent
Several prominent DAOs have successfully implemented legal wrappers, demonstrating the viability and necessity of this approach in today's environment.
- Nouns
- BuilderDAO
- LexDAO
- Friends with Benefits
- Many more
References and Research
Detailed information and discussions with MIDAO are available for members to review on the charmverse page https://app.charmverse.io/purple/legal-wrapper-overview-prop-37-initiative-49699958710444525
Positive feedback and recommendations like the recent one below from Admiral DAO support this approach:
Are you glad you did it?
“I would honestly not even bother considering anything else. The brain damage + fees these other structures were going to take of $100K+. This was like the MIDAO fee and a few hours of legal time.”
-Mark Lurie, Founder, Admiral DAO LLC, which governs the Clipper Exchange
Timeline
- Vote closes
- 1 week for KYC of 1 (or optionally more) volunteer
- 4-6 weeks to develop the operating agreement in conjunction with the MIDAO team
- Submission to Marshall Islands via MIDAO
- One month review by Marshall Islands before receiving charter
This proposal is a strategic step towards securing Purple's future, enhancing its operational capabilities, and safeguarding its members. It's a forward-looking initiative aligning with Purple's ethos of innovation while providing community protection.
Cost
Setup: 3 ETH (~$6K)
Adam Miller, a Purple member and MIDAO founder, has offered guidance and discounted rates (usually $9,500) for this setup.
There is an annual fee after the first year of between $1,500 and $5,000 per year, depending on treasury size at the time fees are due, as outlined on https://www.midao.org/pricing
All these fees include all MIDAO & government fees. There are no hidden fees and no requirement to hire any local law firm or other representatives as is required in many other jurisdictions. Certified documents, future government filings, and document templates are all included in these fees.