How Does a DAO Differ from a Traditional Corporation in Terms of Liability?
A traditional corporation offers limited liability to its shareholders, meaning their personal assets are generally protected from the company's debts. The legal status and liability of DAOs are still evolving and often unclear, potentially exposing DAO members to personal liability for the organization's actions, depending on the jurisdiction.
The lack of a central legal entity complicates legal protection.
Glossar
Limited Liability
Shield ⎊ Limited liability is a legal principle that restricts the financial responsibility of an owner or investor in a business to the amount of capital they have invested.
Central Legal Entity
Entity ⎊ A Central Legal Entity (CLE) within cryptocurrency, options trading, and financial derivatives serves as a designated legal framework for managing operational and regulatory compliance across diverse, often geographically dispersed, activities.
Liability
Exposure ⎊ This quantifies the potential financial downside an entity faces from its obligations, whether stemming from unhedged positions in options or from collateral shortfalls in lending protocols.