TOKENIZATION LLC - Mint/Own/Manage a Delaware LLC on ENS
NAME AND WEBSITE:
TOKENIZATION LLC
tokenizationllc.eth
BACKGROUND:
I think everyone with a self-custody wallet has the same problem, unmitigated legal risk and potential personal liabilities.
I have been an attorney since 2010. The majority of my career I have acted as outside counsel for business organizations for matters like governance, compliance, intellectual property protection, tax strategy, mergers & acquisitions, or other business transactions.
In 2022 I launched an ENS project with a group of 4 that I had never met IRL. An attorney from the US (me); a astrophysicist+mathematician; an Australian photographer/surfer; and an undoxxed team member. I proposed the team set up a legal entity, something like the Cayman Island ENS Foundation for purposes of limited liability protections. Understandably a legal entity wasn’t practical for the whole team. My solution was PUNKS LLC, a Delaware Series LLC I used to “wrap” my wallet on the project multisig.
PUNKS LLC was a solution to a problem I had, but everyone with a self-custody wallet has the same problem, unmitigated legal risk and potential personal liabilities.
PUNKS LLC saved me ~$200 in Delaware filing fees per wallet I “wrapped”, ~$50/year/LLC registered agent fee, and $300/year/LLC in franchise taxes.
WHAT IS TOKENIZATION LLC?
TOKENIZATION LLC lets anyone “mint”, own, and manage a real world legal entity integrated into ENS.
Law is expensive and difficult to scale. At a high level the way the ENS Foundation “wraps” the DAO, TOKENIZATION LLC will scale limited liability legal wrappers to individual users, individual wallets, individual assets and even individual transactions.
The following table illustrates the composable legal mapping for the proposed protected series under TOKENIZATION LLC legally bound to tokenizationllc.eth subdomains:
 |
 |
 |
|---|---|---|
| State of Delaware | |
ENS |
| TOKENIZATION LLC | |
tokenizationllc.eth |
| Protected Series | |
Subdomain |
| Member | |
Owner |
| Manager | |
Manager |
| Books & Records | |
Addresses & Records |
LLC ORACLE
The LLC Oracle is the composable legal, or governance, framework and the documentation memorializing and codifying TOKENIZATION LLC with respect to ENS:
TOKENIZATION LLC Delaware Certificate of Formation
TOKENIZATION LLC Operating Agreement (Drafted, unpublished)
[subdomain].tokenizationllc.eth Protected Series Operating Agreement (Drafted, unpublished/unexecuted)
WHY HAVE A LEGAL ENTITY?
The following is an excerpt from the ENS DAO Governance Documents with respect to the benefits of the ENS Foundation, which are generally applicable as to why everyone would want a LLC acting as a legal wrapper for their wallets and onchain activities:
USE CASES:
Limited Liability Protections:
A Federal Court in California recently ruled the members of a DAO may be joint and severely liable for the damages of the DAO under the theory that a DAO without a legal entity, or “legal wrapper”, creates a General Partnership and members of the DAO are all General Partners.[2] This particular case involved an alleged exploit and loss of ~$50M by a DeFi exchange. The plaintiffs sued the DAO and the members of the DAO. This puts all members holders at risk of being personal liability for a $50M judgment. An LLC used to wrap the wallet(s) hodling governance tokens and participating in governance activities, including voting, can protect the owner and the owner’s personal assets from those activities.
RR-BAYC:
An NFT project that did not use a legal entity “wrapper” to protect the individuals involved. Whatever your opinion about the case or the parties, the defendants were sued by Yuga Labs individually for approximately $2M in profits from alleged trademark infringement. Yuga ended up with a judgement that exceeded the alleged revenues of the project by $7M, because there was no legal entity protecting them, Yuga can pursue that $7M deficiency against the defendants personally, where an LLC might have limited their liability to the $2M in profits and investment in the NFT project.
Bridge IRL Businesses Onchain:
Businesses are more acutely aware of legal and regulatory considerations of accepting cryptocurrency and owning self-custody digital assets. TOKENIZATION LLC provide real world businesses a legal solution and creates a separate vehicle to manage self-custody business wallets and other digital assets, also providing real world business their own legal liability protections from their onchain activities.
Legal Personhood and Right to Contract:
Assume you own a NFT with commercial IP rights. A legal entity gives you a legal vehicle to own the NFT and enter into a real world legal agreements, such as a licensing agreement, of behalf of the NFT. The LLC protects the owner and the owners personal assets from potential liabilities of the licensing agreement.
RWA Tokenization Abstraction:
There are legal and regulatory issues preventing tokenization of certain real world assets. For example, a property owner would not generally be able to tokenize and transfer their property onchain in the US. The US is a patchwork of laws with 50 states and thousands of counties that nearly all have their own rules regarding memorializing transfers of property by recording a public deed. While the direct ownership of property generally cannot be tokenized directly, an LLC can be created to own the property, recorded on a deed, and then the LLC ownership can be tokenized and transferred onchain without triggering a change in legal title of the property.
BUDGET/MILESTONES:
Using the $500 1st place prize from the Webhash Buildathon as an inital budget to date I have achieved the following milestones and exhausted the following budget:
- TOKENIZATION LLC Certificate of Formation, State of Delaware Filing Fee +24 hour expedite service:
$210 - Delaware Registered Agent:
$50/year - Delaware Trademark Fees:
$35 - US Provisional Patent Filing Fee:
$60 - Mystery Expense:
~$79 - ENS Cost:
~$60
Remaining Balance: ~$35
STATUS:
prelaunch
POINT OF CONTACT:
enspunks.eth
Disclaimers/disclosures: Please note that Tokenization LLC is not a law firm, or an accounting firm. Tokenization LLC does not provide legal or tax advice or representation, and is not intended as a substitute for an attorney, law firm, accountant or accounting firm.