Legal

Nothing in this section constitutes legal advice. This is merely a guide on what different types of legal issues you should be thinking of when starting a dApp business. Seek a legal opinion when making important decisions.

Forming a Company

Forming a company in the United States can be complicated. First you need to come up with a name for your company and check to ensure it is still available. Next you need to choose what type of company you want to start.

There are different types of companies, the main two being the Limited Liability Company (LLC) and the Corporation (INC). You can read more about the pros and cons of an LLC vs INC as well as the C-Corp vs S-Corp here: https://www.legalzoom.com/business/business-formation/compare.html

Once you’ve decided on what type of company you want to have, you need to decide where you want to form the company. The pros and cons differ by state with different reporting requirements and fees. You can find the incorporation fees for each state here: https://www.secretentourage.com/entrepreneur/how-much-it-costs-to-incorporate-a-business-in-all-50-states/

When you know your desired name and where you want to incorporate you next need to file your articles of incorporation. If you aren’t exactly sure how to do this you can use a service like Legal Zoom to do it for you. Incorporating a Corporation through Legal Zoom for example can range from $149 to $369 + state filing fees.

Next you’ll need to draft a shareholder agreement with your cofounders. This is not required, but having a clear understanding of your corporate governance will help prevent any internal arguments that could arise in the future. The earlier you do this, the better.

Apply for any licenses or permits you may be required to have to operate in a given state: https://www.sba.gov/business-guide/launch-your-business/apply-licenses-and-permits

Get a tax id number from the IRS (EIN) and open a corporate bank account: https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account

Lastly, find a place to work. As a startup it can make sense to live at home to save money, but once you bring in some money it may be better to get some office space at a place like WeWork. It’s important to work in a place where you will be productive. A separation of work and home can make you much more productive: https://www.fastcompany.com/40502893/this-is-how-working-in-bed-impacts-your-productivity

Intellectual Property

Depending on what you are creating you may want to pursue intellectual property protection. In the United States you can do this in a few different ways:

You can use these to protect your brand and/or your ideas from being copied by others. A patent or trademark through the USPTO (United States Patent and Trademark Office) can be enforced internationally too. You can read more about enforcement here: https://www.uspto.gov/learning-and-resources/ip-policy/enforcement

You should also take into account managing the ownership of what your employees are creating while working for you. You may consider having team members sign an agreement saying that all work done on behalf of your product development is owned by the company. This can be managed easily using something like a team GitHub account.

Do you want your code to be open source or closed source? If open source, what type of license are you considering? Some open source licenses, like the MIT license or the BSD license, allow for anyone to use your code without restriction (permissive software licence). Others, such as the GNU General Public License, allow for free use of your code but require any derivates to offer the same license (copyleft). You can see a full list of the Open Source Initiative approved licenses here: https://opensource.org/licenses/alphabetical

Securities Regulations

The securities legal team Ryu Coin hired

Securities regulations in the United States can be both complicated and ambiguous — see Howey Test. Therefore, the best thing you can do is hire a good lawyer. For example, the Ryu team hired Convex Legal from Chicago who have done an amazing job helping us throughout the process. If you are planning on creating your own token, conducting an airdrop/bounty program, doing a token and/or equity sale and are operating in the United States then you must hire a securities lawyer. Failure to follow the relevant laws in the United States will not go unnoticed. The SEC recently cracked down on Tomahawk Exploration LLC for numerous infractions. There is a way to legally create a dApp business and conduct a token sale (with either a utility or security token) in the US and follow the guidelines already outlined by the SEC — but get a legal opinion first.