As a DAO's core team grows, a single foundation is often no longer enough to comfortably serve both the DAO's governance and treasury functions and its day-to-day commercial and employment needs. The foundation plus operating company model addresses this by pairing a non-profit foundation with a separate operating company that employs the team and enters into commercial contracts. Finjuris designs and implements this two-tier structure for DAOs at this stage of growth.
DAOSpeak to our Web3 legal team
Discuss whether a foundation plus operating company structure fits your DAO's team and treasury needs. Receive a tailored two-tier structuring roadmap.
How the Two Tiers Work Together
The foundation sits at the top of the structure, holding the protocol's treasury and intellectual property, and exercising the governance function that gives effect to the DAO's on-chain decisions. The operating company sits beneath or alongside it, employing developers and other core contributors, entering into service and vendor contracts, and carrying on the DAO's day-to-day commercial activity. The relationship between the two entities — funding arrangements, IP licensing between the foundation and the operating company, and the scope of each entity's authority — is documented through intercompany agreements, giving the structure a clear and defensible legal basis.
Why DAOs Choose This Model
Ring-fencing — commercial and employment liability sits with the operating company, keeping the DAO's treasury at the foundation level insulated from day-to-day operational risk.
Cleaner investor and tax analysis — an operating company gives investors and tax authorities a familiar commercial entity to analyse, separate from the foundation's non-profit governance function.
Scalability — the structure accommodates a growing team without requiring the foundation's own charter and governance model to be redesigned each time.
Clear allocation of roles — contributors are employed or contracted by the operating company, while governance authority and treasury ownership remain with the foundation.
Ideal Use Cases
DAOs with a funded core development team requiring employment contracts, payroll, and standard commercial agreements.
Protocols separating commercial or product-development activity from the DAO's governance and treasury function.
Teams anticipating future licensing in the operating entity, while keeping the foundation's role limited to governance and treasury stewardship.
DAOs that have outgrown a single foundation-backed structure as their team and activities have expanded.
Practical Considerations and Limitations
Two entities mean two sets of filings, two sets of ongoing compliance obligations, and correspondingly higher formation and maintenance costs than a single foundation.
The contractual allocation between the layers — funding, IP licensing, service agreements — needs to be documented clearly to preserve the intended separation of liability and governance.
Transfer pricing and intercompany terms require care, particularly where the foundation and operating company sit in different jurisdictions with different tax treatments.
The operating company's own directors and management carry conventional company-law duties, separate from the foundation's council or board, and governance documents need to reflect this distinction clearly.
How Finjuris Helps
Assessing whether a DAO's governance, operational, and commercial requirements justify a foundation-plus-operating-company structure, as opposed to a single legal wrapper.
Designing the allocation of governance authority, intellectual property, treasury assets, operational responsibilities, and liabilities between the foundation and operating entity.
Preparing the foundation's constitutional documents, the operating company's corporate documentation, and the contractual arrangements governing the relationship between both entities.
Advising on jurisdictional structuring considerations for each entity, including whether a unified jurisdictional approach or a multi-jurisdictional structure is more appropriate based on regulatory, operational, and governance objectives.
Coordinating with tax advisers and other professional advisers on matters such as transfer pricing, intercompany arrangements, service agreements, and treasury funding mechanisms between the entities.
Frequently Asked Questions
Straightforward answers to the questions ask us most often before structuring a DAO.
Structure Your DAO with a Foundation and Operating Company
If your DAO's core team and commercial activity have grown beyond what a single foundation should reasonably hold, Finjuris will design the two-tier structure and draft the documents needed to separate governance and treasury from commercial and employment risk.
Book a consultation with Finjuris
Discuss your DAO's team, treasury, and commercial activity with our Web3 legal team. Receive a tailored two-tier structuring recommendation.
This page is provided for general informational purposes and does not constitute legal advice. Whether this structure is appropriate for a given DAO depends on its specific governance model, activities, and regulatory exposure, and should be assessed with qualified legal counsel before implementation.
