How it works
A DAO is governed by token holders voting through smart contracts. Without a legal wrapper, a DAO with U.S. members may be treated as a general partnership for tax purposes, with Form 1065 and Schedule K-1 obligations that nobody is handling and personal liability for members. Some states offer DAO LLC statutes. Governance tokens received for contributions are generally income when received and transferable; treasury activity may be partnership income to the members.
Why it matters
Participation can create partnership tax exposure that members do not know about, and if the DAO is foreign for U.S. purposes, Form 8865 issues follow.
Related: Schedule K-1, Form 8865. Read more: crypto and Web3.
