Coin to Company Process

This page summarized the process for setting up an IP oriented, for profit entity the involves a token launch.

Summary of Coin-to-Company Process

Step 1.1: An association of people, set up as either a Delaware or Wyoming UNA, launches a token ($TOKEN) related to an arbitrary organization/topic (called the "Project"), with a Whitepaper.

Step 1.2: The Whitepaper makes clear that $TOKEN holders are members of the Project association by virtue of holding the $TOKEN. $TOKEN issuance also comes with an association membership/contributor agreement that assigns Project IP to LabsCo (defined below). The Project association is referred to as a "DAO."

Step 2: An LLC with C Corp election is established, largely by the same people who started the DAO, ideally in Delaware but could be any state. The LLC is referred to as a "LabsCo."

Step 3.1: LabsCo’s Articles of Organization provide that only members of the DAO may become shareholders of the LabsCo. LabsCo’s Articles of Organization also largely use “shareholder” terminology since it has a C Corp election.

Step 3.2: LabsCo’s Articles provide that LabsCo is a "crypto-based company," and so members of the DAO may stake their $TOKENs with the LabsCo blockchain protocol, which thereby creates "Locked Tokens" or "L-$TOKENs" for the Project $TOKEN holders. L-$TOKEN holders may provide non-binding advisory input on LabsCo proposals. L-$TOKEN holders may unlock and sell their $TOKENs at any time, at this stage.

Step 3.3: LabsCo’s Articles provide that L-$TOKEN holders (who must be DAO members) may apply to LabsCo to get LabsCo equity in the following three share classes, which may be issued separately or concurrently, via one of the following methods, following each L-$TOKEN holder's successful KYC/AML screening and shareholder application:

Class A Preferred: Reg D/S/A/CF for crypto/fiat consideration, with liquidation preference, and possible participation, at LabsCo's discretion. The fact that Reg D would only be offered to known L-$TOKEN holders could open up 506(b), subject to further legal review.

Class B Common: Rule 701, for Employment Agreement for the team

Class A Common: Rule 701, for AIPP (Advisory, IP, and Promotion) Agreement for the contributor community.

Step 3.4: L-$TOKEN holders who become shareholders use their L-$TOKENs for binding corporate governance, dividend receipts, and other corporate participation and benefits.

Step 3.5: L-$TOKENs associated with LabsCo shares must remain L-$TOKENs for so long as the associated LabsCo shares are owned by the L-$TOKEN holder.

Step 4: L-$TOKEN holders can sell their equity following the requisite holding period, when L-$TOKEN holders will be able to unlock and sell their $TOKENs.

$TOKENs and L-$TOKENs were, are and always will only be technology to interact with the company with no associated rights.

Notes:

Each share obtained requires one L-$TOKEN since each L-$TOKEN is used to vote the share, receive share distributions, and engage with LabsCo as a crypto-based company, but there is no formal correlation between $TOKENs minted and authorized or issued shares other than having enough L-TOKENs for desired shares.

$TOKENs and L-$TOKENs were, are and always will be only technology to interact with the company with no associated corporate rights, such as voting power or any dividend rights. They may have non-corporate benefits such as research, participation, product and discount rights granted by LabsCo and at its discretion.

Recommend Rule 701 grants are direct without vesting so 409A is not triggered, but vesting is optional across all share classes.

LabsCo is encouraged to tokenize equity, dividends, IP, and other company assets into RWAs since all shareholders are token holders, and it's explicitly a crypto based company.

LabsCo shareholders need not manage wallets themselves. For example, Class A Preferred could have LabsCo lock the $TOKENs on the Investor's behalf and vote the L-$TOKENs by proxy, off-ramp dividends, etc.