Limited Liability Autonomous Organization

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= "The LAO: A For-Profit, Limited Liability Autonomous Organization".


The Lao:

"OpenLaw is the first fully expressive Ricardian contracting system — the bridge between traditional legal regimes and the Ethereum world. OpenLaw can be used to create binding legal agreements and tie them to the execution of one or more smart contracts, including smart contracts that create and manage tokens. Through this approach, any token operating on Ethereum and any smart contract can be imbued with legal effect.

Using OpenLaw, DAOs can be set up as traditional legal entities and can use binding legal agreements to effectuate the transfer of assets or to perform other tasks. We have already demonstrated this possibility through the launch of our vertical OpenLaw DAO. We now are extending this concept with the launch of the LAO. Much like how Coinbase helped bring the trading of traditional assets to millions by attempting to comply with various legal requirements, OpenLaw will help to resurrect the initial vision of The DAO in a manner that comports with U.S. law.

The LAO will provide a legal structure to enable members to not just give grants, but to invest in blockchain-based projects in exchange for tokenized stock or utility tokens. Projects or Ethereum-based projects will be able to receive funding for their projects in days once submitted to the LAO.

Using the tooling provided by OpenLaw, the LAO will be set up as a limited liability entity, organized in Delaware, using curated smart contracts to handle mechanics related to voting, funding, and allocation of collected funds. This entity will presumably limit the liability of LAO members and help clarify their relationship to avoid knotty questions related as to whether partnership law applies. This structure will also provide members of the LAO with tax flow — through treatment by the Internal Revenue Service, such that tax is not paid by both the entity and a person holding a beneficial interest in the LAO.

Members will be able to purchase interests in the LAO and the proceeds from the purchase will be pooled and allocated by members to startups and other projects in need of financing, using a voting mechanism and tools similar to Moloch DAO.

In order to comply with United States law, membership interests of the LAO will be limited and only available to parties that meet the definition of an accredited investor — although there are arguments that LAO membership interests may not be securities. And, the LAO will be anchored by 10 founding members (which will be announced shortly). Other interested parties will be able to purchase interests in the LAO (potentially through a public sale).

Through OpenLaw’s tools, the creation and set up of The LAO will be streamlined. All of the relevant legal documents from the entity formation documents to member subscription agreements will be generated via the OpenLaw protocol — taking complex corporate financial processes and streamlining their operation — while also providing members with the backing of the U.S. legal system. We also will be exploring on-chain verification of accredited status for the LAO using third-party oracle services (such as ChainLink) to streamline the onboarding process.

Much like the original Moloch design, members of the LAO will be able to ragequit and immediately retrieve back their fair share of unallocated funds based on their economic contribution (regardless of voting weight). With this safety mechanism in place, LAO members will always have the option to opt-out of the LAO should they disagree with aspects of the LAO membership, investment portfolio or need to rapidly receive back their assets. Extending emerging Moloch designs further, LAO members can also continuously claim their fair share of profits provided by tokens received from projects that receive investment from the LAO, further incentivizing collective LAO diligence, voting participation, and membership stability." (


The LAO:

"These organizations build on a long lineage of technical and legal innovation. The Romans devised a variety of commercial entities, such as the societas peculium and societas publicanorum, that enabled parties to share in an enterprise’s profits and losses while also providing limited liability. During the Middle Ages, Italians pioneered early versions of a limited partnership to finance maritime trade. Joint-stock companies emerged in England and the Netherlands in the 1600s, providing organizations state-granted monopolies to engage in productive commercial enterprises. The modern corporation took root in the United States in 1811, when New York granted private parties the power to form their own corporate structures without an extensive approval process. These legal innovations helped modernize the globe, allowing individuals from different backgrounds to align incentives towards a common goal. They created a framework for funding new ventures, managing risk, and creating opportunities for profit, which in turn, fueled generations of innovation and wealth creation." (