GM 54.1 : gm. studio incorporation

Author:

Cyphr

Abstract:

Incorporate the studio as a limited liability company in Switzerland (GmbH) & clearly define it’s relationship with the DAO from a legal perspective.

NOTE: The purpose of this proposal is to get DAO approval for associated costs of incorporation & legal ownership/structure of the studio (i.e shareholders & board). A second proposal will follow once the articles of association have been drafted in order to define the studio team powers & responsibilities, as well as an accompanying service agreement which stipulates the relationship between the studio & DAO.

Motivation/Rationale:

Tax & Legal: Having a separate entity which is able to retain it’s revenue, deduce operating expenses & then send profit back to the DAO as a donation, is a much more tax advantageous flow.

Structure & ownership: Much of the studio was built & maintained by a small group of people prior to funding by the DAO. Ongoing maintenance & development has subsequently been supported by DAO funding. This presents an unique situation in regards to legal ownership of IP & branding. This proposal seeks to give clarity on the studio ownership & share structure.

Specifics

Tax & Legal

As one of the primary revenue sources for the DAO, the studio must be set up in a way that I can easily declare it’s turn-over, operating costs & profit. Today, this is difficult to achieve given that operating costs are covered by the DAO & all revenue is then sent back to the DAO treasury. This is not optimal when calculating what our net profit is, which is what matters when declaring to tax authorities.

As a GmbH based in Zug Switzerland, our corporate tax rate would be roughly 8%.

Structure & ownership

The company would be formed under a limited liability partnership (GmbH) in Zug Switzerland. The requirements of forming an LLC in Switzerland are as follows:

• A limited liability company (GmbH) must have a share capital of at least CHF 20,000. This starting capital would need to be contributed equally according to the final share structure. This capital is still owned by the DAO, but held on the studio books.
• An authorized person in Switzerland (administrative board / managing director/ authorized signatory) is required. In our case we have opted to an authorized signatory. Quoted @ CHF 10,000/year via Sielva Management
• A Swiss Domicile in Zug (we already have this)

Proposed board:

Executive: Cyphr, Willyham, Bhish,

Non executive: CxKoda (advisory), Rich Poole (advisory), Swiss based authorized signatory (via Sielva Management)

Share structure:

We are proposing the following share distribution to reflect the initial contributions of team members prior to incorporation & to ensure their continued time investment to the company

DAO: 85% (CHF 17,000 starting capital)

Team: 15% (CHF 3,000 starting capital)

Cost breakdown

Incorporation fee: Nul (covered by previous proposal)

Starting capital for GmbH: CHF 20,000

Annual fee for authorised signatory: CHF 10,000 / year

Board & company insurance: Est. CHF 2-3000 / year

Misc. expenses (opening bank account etc): CHF 1-2000

Total: CHF 35,000 / $ 38,000