Creating a legal entity and TM registration

We have been talking in #legal Discord channel about various legal aspects that should be community considered and discussed because of their implications. I will try to make a little resume of what we talked about to avoid future repetitions and allow the conversation to go forward.

1.- ETHICS and MORALS of going legal.
2.- About creating a legal entity.
3.- Trademark registration
4.- Taxes and potential liabilities

1.- First comes the “ethical” and narrative argument, @0x10 is against taking any kind of legal measure, he would try to avoid locating Hic et Nunc at all costs since he says there is no need to bind us to someplace and we don’t need it. Each one of us should manage our own governments and shit, but Hic et Nunc’s shouldn’t incorporate into the system because we are building an alternative.

In favor of legal compliance, @borsss says: “Once countries start coming after unregistered crypto “companies”, they’re no more legal than dark web drug sites if they’re not compliant with tax or securities law.
So it becomes a matter of personal risk. Even going legal by registering comes with risks and consequences. Ebay had to eventually start collecting global sales tax for facilitating other peoples’ purchases, so NFTs are going to be the next big target”. __orderanchaos agrees: “Yeah I’ve worked on international sales taxing systems, it’s my fear it’ll hit NFTs sooner or later”.

Most western countries (no one with legal knowledge from southern countries was present) would treat an association of people (like what we are on HEN) as Partnership. @borsss “If you don’t have a legal entity registered (which includes the new special DAO status from places like Wyoming), any DAO would be considered as a Partnership by most jurisdictions, which generally means unlimited liability, and tax people & courts will come after the easiest to find people in case of problems.” HEN made over $800k in revenue under Rafa, and I’m fairly sure not all of it was spent on operating costs, so there’s bound to be some taxes due on the profit somewhere.

2.- In order to easily hold rights, sign agreements, partnerships, do taxes, improve working conditions, buy assets, register a Trademark or Intelectual Property we would need to be a LEGAL ENTITY. There are two kinds of legal entities that could be useful for us, DAO (as disposed on Wyoming legislation) or a NonProfit/Foundation (as Tezos or Eth foundation on Switzerland).
In these kinds of legal topics, there is not much place for innovation, it requires very specialized knowledge and legal fees would be a big chunk, so the best we could do (by now) is rely on the power of decentralization and others experience. For that, @ dianedrubay said: “I can def help with that via Blokhaus (PR dpt of the Tezos ecosystem)” and @ Somaticbits offered us @ jantine help since she has been helping on similar projects on Ethereum and is now gonna do the same on Tezos.

One of the biggest differences between DAO and Non-Profit is that in a NonProfit we wouldn’t be able to redistribute fees to our holders, since it would be considered as giving dividends to stakeholders.

A lot of people is worried about keeping anonymity, under DAO form there shouldn’t be much problem. In DAO form “under Wyoming legislation there’s no requirement to identify members or have a register w/ KYC (https://www.wyoleg.gov/Legislation/2021/SF0038). But the DAO’s own articles of organization might require a form of KYC. For example, to prevent money laundering from going through its books. Wyoming DAO law also allows 1 person 1 vote, which would require identity checks to eliminate sybil attacks.” (@borsss)

3.- Trademark registration is another controversial issue. Against @0x10: “TM is a concept used by companies with money to steal the property of others and claim this theft is legal because they ‘got there first’ moral rights are more than good enough. Literally nowhere outside of EU and US even takes these concepts seriously tho they’re actually quite quaint. This is an EU and US problem for Most of us it is zero concern”. He thinks it is a western concept and its not needed on HEN. “The danger is picking a master when there is no need to do so”.

In favor: Most countries are into the "Madrid Agreement Concerning the International Registration of Marks" (https://www.wipo.int/export/sites/www/treaties/en/documents/pdf/madrid_marks.pdf), Trademark registration has its logical and practical reasons, first and most important, The Trademark register works as a public communication to third parties of your Trademark use and ownership and, as a result, it gives some valuable rights and tools to defend your Intelectual Property.

The risks of being unregistered are real, we wouldn’t be able to protect our image and brand in case some bad actor decides to use it or manipulate it for profit. But not only that, the bad actor would be able to punish us in those jurisdictions where the TM is registered and we haven’t shown opposition. If HEN succeeds there will be much more competition than there is now, HEN brand would be incredibly valuable, and by not TMing it we leave freeway for opportunists to take advantage of the situation while neglecting our rights on those countries that signed the Madrid Agreement.

If a different actor registers the brand, they would even have the chance to take us to Court or even block your access through your ISP. But not only that, another bad actor could register it and start a private business with HEN’s name, invest a lot of money in PR and advertisement, and actively try to invisibilize us over IP infringements, since he could be the TM owner.

These risks could not only affect users from countries that signed the Madrid Agreement by making it harder for them to access the service, and making it harder to increase the userbase those countries, but also affecting HEN’s future, public image, and valuation. If we don’t have exclusive ownership of our brand, we almost wouldn’t be able to control anything about the usage external actors do. Not registering the TM its renouncing rights over our brand. @borsss: “Things like copyright or trademark abuse affects those countries that ignore it at a macro-economics & global trade level. Even China has stepped up its anti-counterfeiting stance.”

** There is still nothing sure about HEN’s brand ownership until Rafa doesn’t say something himself. The general opinion is that it should belong to the community but, legally and formally, it belongs to Rafa because he was the creator. Afaik, we are waiting for an answer.

4.- Taxes. As said before, HEN made 800k revenue under Rafa’s. Governments are starting to look at these kinds of things more and more as time goes by, so it would be wise to have into consideration possible tax liabilities we may have. If eBay had to eventually start collecting global sales tax for facilitating other’s purchases, we may be in the obligation too. Is another important issue that we might want to look at.

Feel free to correct me if I’m wrong and add your opinion about the topic. It may be hard to see the current benefits of all these legal things, but these details help to ensure a more stable, safe, and less risky future, and the community should know and decide about it.

Thanks so much to everyone contributing to the discussion. Everyone is free to join.

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My soul feels closer to a free world with no states neither TMs but I think we can’t ignore the rest of the world and if we want HEN to be respected it needs some kind of accepted legal form.

I would go in the direction of the foundation to ensure a clean future