The RMI DAO framework is intentionally agnostic regarding the organization’s purpose, allowing registration as either a for-profit or non-profit entity. This election is fundamental to the DAO’s tax obligations, internal distribution rules, and governance structure.
Side-by-Side Comparison
| Feature | For-Profit | Non-Profit |
|---|---|---|
| Tax Rate | 3% GRT on gross revenue | 0% — fully tax exempt |
| Capital Gains Tax | 0% | 0% |
| Withholding Tax | 0% | 0% |
| Profit Distribution | Permitted to members | Prohibited |
| Ownership | Beneficial owners | Beneficial members (no ownership) |
| Revenue Reporting | Required annually | Not required |
| Foreign Source Income | Generally untaxed (territorial) | N/A — all exempt |
| Share Structure | Class A (Voting) + Class B (Voting + Profit) | Governance tokens (Voting only) |
The For-Profit DAO LLC
For organizations intended to generate revenue and distribute earnings — investment DAOs, DeFi protocols with fee-sharing, NFT marketplaces — the for-profit status provides the legal path to return value to members.
The 3% Gross Revenue Tax
For-profit DAO LLCs pay a 3% tax on gross revenue as defined in Section 109 of the Income Tax Act 1989. Key details:
- Territorial system — Revenue generated from foreign sources is generally untaxed. For most DAOs operating globally, the effective tax burden is minimal.
- Capital gains excluded — Capital gains are explicitly excluded from the GRT tax base. Token appreciation, asset sales, and investment returns are not subject to the 3% tax.
- Dividends excluded — Dividend income received by the entity is also excluded from the GRT calculation. This is significant for DAOs holding equity positions in other entities or receiving distributions from Series sub-entities.
- Annual filing — Revenue must be reported and the tax paid annually
- Distribution rights — For-profit DAOs may distribute earnings among members based on the rules in their operating agreement or smart contracts
The combined effect of these exclusions means the 3% GRT applies only to active business revenue — fees, service income, and similar operational receipts. For DAOs whose primary activity is holding and trading assets rather than generating service revenue, the effective tax rate approaches zero.
Share Classes
entity.legal structures for-profit entities with two share classes:
- Class A — Voting — Governance rights only. 100% anonymous. No profit distribution rights. Ideal for contributors, advisors, and governance participants who don’t need economic exposure.
- Class B — Voting + Profit — Full governance rights plus profit distribution. Shareholders receive proportional distributions from the entity’s earnings.
Shares can be swapped between Class A and Class B at any time, allowing members to move between governance-only and profit-sharing roles as the organization evolves.
The Non-Profit DAO LLC
Non-profit DAO LLCs are governed by both the DAO Act and the Non-Profit Entities Act of 2020. They are designed for public goods, grant-making, social impact, and protocol development.
Defining Characteristics
- No distributions — Strictly prohibited from distributing any funds or property among members
- Ownerless structure — Members have “beneficial membership” (responsibility and voting) but no ownership interest or economic rights
- Complete tax neutrality — 0% corporate income, capital gains, and withholding taxes
- No revenue reporting — Non-profits are not required to report their revenues annually
Ideal Use Cases
- Protocol treasuries — Managing community funds where the goal is to fund development, not return profits
- Developer grants — Distributing funding for open-source development
- Public goods — Any mission-driven DAO where profit distribution would undermine the purpose
- Research organizations — Academic or scientific DAOs with community governance
Choosing Your Election
The choice between for-profit and non-profit is irrevocable at formation and determines the fundamental character of the entity. The key question: will the entity ever distribute profits to members?
If yes — for-profit. The 3% GRT is one of the lowest effective tax rates globally, and the territorial system means most internationally-sourced revenue faces no tax at all.
If no — non-profit. The 0% rate and absence of reporting obligations make it the cleanest structure for mission-driven organizations.
Further Reading
- Marshall Islands DAO LLC — The complete legislative framework
- Series DAO LLC — Segregated liability for multi-product DAOs
- Compliance & KYC — BOIR, FIBL, and reporting requirements
- Jurisdiction Comparison — Tax treatment across jurisdictions