Utah Passes Bill Recognizing the Legal Status of DAO Organizations

Starting from January 1, 2024, the state of Utah in the United States will officially recognize the independent legal status of the decentralized autonomous organization (DAO). This decision stems from the passage of H.B. 357, the "Decentralized Autonomous Organization Amendments," by the state legislature on March 1. The passage of this bill marks a unique legal status for DAOs in the U.S., allowing them to operate without needing to rely on other legal entity forms.

Previously, DAOs typically needed to obtain legal recognition through traditional legal entities such as registering a limited liability company (LLC), foundations, or special purpose trusts. However, the implementation of the new bill means that DAOs can exist as an independent organizational form without needing to be "wrapped" into other entities.

The bill clearly defines the organizational status of the DAO, member responsibilities, and other aspects.

1. The DAO is granted legal person status and can conduct legal business activities.
2. The DAO adopts a limited liability system, with the liability capped at its total assets.
3. Individual members usually do not bear liability unless the DAO refuses to execute a legal judgment.

Regarding the establishment requirements of the DAO, the bill stipulates:

• A natural person must be the registrant and public contact.
• Must establish the articles of organization.
• Should be deployed on a public chain, implement decentralized governance, and publicly disclose the code and address.
• An authorized legal representative must be established to handle off-chain matters.

Regarding membership and responsibilities, the bill clarifies:

1. All members are considered co-managers.
2. The holders of governance tokens are DAO members.
3. Members may not request the dissolution of the DAO on the grounds that funds cannot be refunded.
4. Taxation is defaulted to be executed under a partnership system, but the method of corporate taxation can be chosen through voting.
5. Under a partnership system, the DAO can distribute profits to members, who pay personal income tax.

The passage of this bill provides a clear compliance framework for DAOs, helping to address the legal issues they face in practice. As more and more DAOs venture into complex business areas, the implementation of this bill will provide important legal protection for them.

It is worth noting that the bill even specifies technical details such as hard forks in blockchain networks, reflecting the legislators' in-depth understanding of blockchain technology. This initiative will undoubtedly provide strong support for the development of DAOs and may also serve as a reference for other regions in formulating relevant regulations.