Once upon a time, in the world of web3, there were two entrepreneurs: Harry and Sally. Harry thought he was a maverick and decided to go it alone, ignoring the need for legal counsel. Sally, on the other hand, knew better than to play Russian Roulette with her business and had an experienced lawyer on her side.

Harry was so eager to launch his business that he forgot to dot his I’s and cross his T’s. He neglected to set up his business as a proper legal entity, failed to obtain liability insurance, and thought a couple of Twitter DMs and a handshake were all you needed to prove a legally binding agreement. It didn’t take long for things to go awry.

His clients sued him left and right, because of misunderstandings with some also claiming they hadn’t received the services they paid for. To make matters worse, the federal government accused Harry and his team of wire fraud for transferring questionable funds electronically between states and other countries. The fines, legal fees, and tax issues piled up, and Harry had to kiss his business goodbye.

Meanwhile, Sally knew what she was doing. She hired an experienced lawyer to guide her through all the important decisions. Sally set up her company as a corporation and used it to wrap around a new DAO. She was careful to use smart contracts and traditional written agreements to control the decisions of everyone in the business.

Sally even had her lawyer help with contracts and terms of service agreements which specified venue and what law would apply to claims and disputes, to use with her clients. When disputes did happen, the agreements required everyone to resolve those disputes in Sally’s home town. This kept Sally and her team from having to travel to other states and even other countries to deal with legal issues.

Sally made sure to have proper liability insurance, and when a claim was brought, the insurance company handled everything. As business picked up, Sally’s lawyers advised her to hire a CPA, who counseled her to make certain business tax decisions that reduced her liabilities on taxable income at the end of the year. As she rolled out NFT tokens to create new client experiences, the lawyers showed Sally how to do business without violating SEC rules and regulations.

Harry learned the hard way that seeking legal advice is not an option but a necessity for any web3 entrepreneur. Sally’s success story showed that the right legal advice can make all the difference in the world of web3.

And just in case you missed them, here are the top 20 reasons why Sally chose to have experienced lawyers help her with starting and running her business. Harry probably should have paid attention to this list, but alas, he was too busy listening to the wrong people giving bad advice on a Twitter Space.

Getting experienced legal advice allowed Sally to:

#1: Get personalized legal and business advice tailored to your specific needs and goals.

#2: Ensure compliance with complex regulations and laws in the web3 space.

#3: Protect your intellectual property and assets, including trademarks, patents, and copyrights.

#4: Review and negotiate contracts, including smart contracts, NFTs, and other blockchain-based agreements.

#5: Stay informed of the latest legal and business developments in the web3 space.

#6: Develop a comprehensive legal strategy that aligns with your business goals and objectives.

#7: Draft legal documents and agreements, including terms of service and privacy policies.

#8: Manage and mitigate legal risks associated with operating in the web3 space.

#9: Resolve disputes with other parties, including mediation, arbitration and litigation.

#10: Ensure compliance with tax laws and regulations in the web3 space.

#11: Conduct due diligence on potential business partners, investors, or acquisitions.

#12: Implement effective corporate governance and compliance programs.

#13: Protect your personal assets and limit personal liability in business transactions.

#14: Provide guidance on fundraising and financing, including ICOs and STOs.

#15: Develop a comprehensive cybersecurity strategy to protect against hacks and data breaches.

#16: Navigate the complex legal and regulatory landscape of web3, crypto and metaverse.

#17: Provide guidance on cross-border transactions, operations and international law issues.

#18: Develop strategies for resolving disputes through alternative dispute resolution methods.

#19: Help ensure compliance with anti-money laundering laws and regulations.

#20: Provide guidance on the use of AI in the web3 space, including ethical considerations and potential legal issues.

While some of these benefits may seem obvious, such as ensuring compliance with complex regulations and laws or protecting intellectual property, others may not be as apparent. For example, Sally never even considered the importance of developing a comprehensive cybersecurity strategy or the need for guidance on the use of AI in the web3 space.

After successfully blocking an attempted hack on her discord community, she’s glad she followed her lawyer’s advice and cybersecurity recommendation. Her lawyer’s advice about the inability to copyright AI generated images is what saved Sally from a massive lawsuit after her client wanted to use a new AI generated monkey as its new mascot during a $7M 30 second Super Bowl ad.

By utilizing experienced legal counsel, web3 creators, business owners, and entrepreneurs can rest assured that they have the necessary support and guidance to succeed in the new digital landscape.

Please stay in touch and make today your masterpiece!

Mitch Jackson, Esq.
2013 California Litigation Lawyer of the Year
2009 Orange County Trial Lawyer of the Year

_____

⚖️ I’m a lawyer with three decades of experience who enjoys helping others and doing all I can to add value to our community.

🔦  I shine a bright light on others by pinning and sharing their content.

🔔  Please follow me here and on LinkedIn (hit the bell “alerts” on LinkedIn) to be notified when I post and go live.

📩 Enjoy my weekly LinkedIn “Web3, Metaverse and AI” Newsletter!

Are you curious about the latest updates and trends about Web3, Metaverse, and Artificial Intelligence? Looking for expert business and legal tips to help you navigate these emerging technologies?

Then you will want to experience what I have in store for you – a treasure trove of cutting-edge information, including new platforms, services, and exclusive interviews! Join my newsletter community as we explore the brave new world of Web3, Metaverse, and AI and gain the knowledge you need to thrive in this rapidly evolving landscape.

📩 Enjoy my weekly Substack “The Mitch Jackson Update” Newsletter!

Effective communication is crucial. It’s the key that unlocks the door to building relationships, inspiring innovation, and achieving success. It’s the bridge that connects people, ideas, and opportunities, enabling us to reach new heights together.

Each week in the update, I focus on sharing with my community, 3+ decades of communication tips, approaches, and ideas as they relate to business, entrepreneurship, persuasion, and trending topics. Subscribe to get full access to the newsletter and website. Never miss an update!

#web3 #entrepreneur #blockchain #

 

The life of a web3 entrepreneur and lawyer

 

Potential client (PC): I want to have you create a DAO for my new startup.

Me: Why are you thinking of a decentralized autonomous organization (DAO)?

PC: It’s the latest thing. I want to walk my talk and be a leader in the web3 space.

Me: That’s cool. Tell me more about your plans.

PC: Shares facts and other details.

Me: OK. I get it. You reside in Florida, will be doing business around the world, and want to create your DAO in California?

PC: That’s right.

Me: Are you aware that if you move forward as planned, and something bad happens in your DAO, the court will probably determine that you’re doing business as a general partnership and allow a judgment to be entered against you for liabilities of the DAO?

PC: No.

Me: Are you aware that if we go forward with your plans, in all likelihood, your personal assets, things like your bank account and investments, may very well be exposed to the collection efforts of judgment collectors because of the business liabilities of your DAO?

PC: No. I thought I would be protected because I’m doing business as a California DAO.

Me: Did you know as of this date, California doesn’t recognize a DAO as a legal entity?

PC: No, I thought everyone was using them.

Me: Who told you that?

PC: I heard about this on a Twitter Space. The person hosting the space sounded like he knew what he was talking about.

Me: Well, he’s 100% wrong. Too many people confuse a 15 minute Google or ChatGPT search with sound and experienced legal advice.

PC: What would you suggest?

Me: Based upon what you told me, I would use a traditional corporation or limited liability company to start your new venture. They are recognized under the laws of California and Florida. Statutory and case law is well established giving everyone a clear idea of what you can and can’t do. Investors and other venture capitalists will be more comfortable doing business with a well recognized legal entity instead of a speculative and untested new type of web3 entity.

PC: OK, that sounds like a good idea.

Me: Depending on where you set up your corporation or limited liability company, you will be filing state taxes (in California) and federal taxes. That’s OK because experienced accountants know how to handle corporate and limited liability company tax returns. They also know how to advise you to make smart business decisions to minimize taxes and maximize profits. Adding certain corporate employee retirement plans allow for additional income deferment and tax reduction strategies. That’s not the case with the new DAOs. There’s still a lot of speculation on how to treat DAOs in most states.

PC: That’s good to know. I didn’t think about that.

Me: Yes, using a traditional business entity takes the speculation and guesswork out of how you can safely do business.

PC: That will allow my team and me to focus on rolling out our new product instead of the possibility of making new law with our DAO.

Me: Exactly. Now, if you do want to create and use a DAO to build web3 credibility and to allow your community to be involved and make certain decisions, what you can do is wrap a new DAO with your limited liability company. By this I mean, either your original limited liability company, or a brand new sub-limited liability company would be the entity to create and manage the DAO that you desire. When done correctly, all DAO liabilities will fall back to the limited liability company and not you personally.

PC: That’s brilliant.

Me: Depending on the business decisions one or more of the limited liabilities and the DAO make, using these additional entities with the advice of an experienced accountant may result in you being able to reduce, defer and even eliminate certain income and related tax liabilities. There are a lot of moving pieces that when used correctly, can help you manage and run an efficient and profitable business.

PC: That works for me. We also want to do one or two NFT drops each over the next 5 years. Any thoughts about how to do this in the best way?

Me: Of course. Your corporation or limited liability company may want to create a separate limited liability company for each NFT project and drop. The income, expenses and liabilities for each project will remain separate and independent from all your other business ventures. If something bad happens, you can limit your exposure to that single NFT project, drop and limited liability company. The rest of your businesses and your personal assets will not be exposed to liability.

PC: Any other tips?

Me: Protect all the above with proper liability insurance. Also consider adding your legal interest in each of the legal entities and projects into your business succession and estate plans. If something happens to you, you want to make sure that you’ve already given legally binding instructions as to who owns and manages your various businesses and assets.

PC: This is all new to me. I never considered any of that.

Me: No worries. Most people don’t. That’s why I’m here.
_____________

Please stay in touch and make today your masterpiece!

Mitch Jackson, Esq.
2013 California Litigation Lawyer of the Year
2009 Orange County Trial Lawyer of the Year
mitchjackson.com | JacksonWilson.io

#web3#web3 #DAO#DAO #lawyer#lawyer