Phase 1: Web3 Project Set-Up, Essentials and Early Growth

1. Start with Company Formation

A Web3 project legal structuring begins with forming a legal entity. Without one, the core team may be deemed to operate as a general partnership—exposing each member to unlimited, joint and several liability for all obligations of the project. In such a structure, legal risk is uncontrolled and personal assets may be at stake in the event of a claim or dispute, and the project cannot legally engage in business. Establishing a developers’ company (or DevCo) provides limited liability protection and a formal legal boundary between the project and its contributors. In most cases, a basic company (like a corporation or LLC) in the jurisdiction of the core team is sufficient to achieve this.

If you have more than one shareholder, consider incorporating more comprehensive corporate governance procedures into the articles or bylaws, or preparing a separate shareholders’ agreement. A shareholders’ agreement is not legally required, but it is strongly advisable. It sets out the decision-making processes, share transfer restrictions, tag-along and drag-along rights, and mechanisms for resolving disputes. Even with a small and aligned founding team, having governance provisions in place early helps prevent deadlock and provides clarity as new stakeholders join the project.

2. Plan for Tax Early and Understand CFC Rules

Think about taxes from the start. Tax planning must run in parallel with corporate setup. Offshore entities often attract Controlled Foreign Corporation (CFC) rules in the home jurisdictions of founders, which can tax offshore profits as if they were received in the home country. In some cases, using a non-profit, ownerless foundation (with no shareholders), such as one incorporated in the Cayman Islands, may help to mitigate tax exposure and align with decentralization goals. However, the structure must be carefully designed.

Team token allocations should also be structured carefully. A simple free distribution of tokens (token grant) to team members and advisors is likely to result in immediate personal tax obligations in their country of residence. Engage specialist tax advisors in your home country to model outcomes and advise on reporting obligations.

3. Secure Intellectual Property Rights and Confidentiality

All developments, product code, designs, branding and documentation must be owned by your corporate entity. To that end, every founder, employee and contractor should sign a property drafted comprehensive IP assignment to ensure that the rights in IP pass onto the corporate entity. These agreements must expressly assign rights in perpetuity to the company, and must be enforceable under applicable laws. This oversight can lead to serious conflicts down the line.

Beyond assignments, establish procedures for handling trade secrets and confidential information. Limit access on a need-to-know basis, require NDA protections for external parties, and document any third-party open-source components you incorporate into your product (including license terms). The “cleanroom” approach shall fortify your IP portfolio and smooth the path for due diligence in fundraising or M&A in the future.

4. Structure Relationships with Team Members and Contributors

Beyond securing IP rights in what has already been developed, it is critical to formalise the ongoing relationships with the project’s employees and contributors. Clearly defining the roles, rights, and responsibilities of everyone involved in your Web3 project is critical from day one. Every team member, co-founder, advisor, or contributor should have a written agreement in place – whether it’s an employment contract, advisory agreement, or contractor arrangement. These documents should cover compensation terms, confidentiality, full IP assignment, liability, dispute resolution, and termination procedures. Without clear contracts, informal understandings can quickly become sources of conflict, especially as the project grows or if relationships deteriorate.

Establishing these relationships formally helps protect the project and reduces the risk of misaligned expectations, ownership disputes, or liability claims. Even in close-knit teams, handshake deals are not enough. A well-documented foundation ensures everyone knows where they stand – and it builds long-term clarity, trust, and legal resilience.

Phase Two: Token Issuance and Fundraising

5. Structure Token Issuance Through a Separate Vehicle

Token creation typically demands a separate special purpose vehicle (SPV). Many jurisdictions regulate token issuers as Virtual Asset Service Providers (VASPs), requiring licensing, an AML programme, a designated Compliance Officer, Know-Your-Customer (KYC) checks, and further reporting.

In many instances, especially where the token serves only as a governance tool, a utility feature, or digital access mechanism, subjecting the issuance to full VASP compliance would be excessive and unnecessary. In such cases, it is advisable to select a jurisdiction that either has no VASP regime or where token issuance is clearly excluded from the scope of existing VASP regulations. This allows the project to launch more efficiently, without disproportionate regulatory burden or compliance blockers.

Same as with the DevCo, consider the CFC implications before setting up a token issuer entity to ensure that the token generation event does not result in adverse tax consequences or unexpected obligations for the founders and core team members.

6. Use the Right Token Offering Documents

Public and private token offerings require careful structuring. Do not underestimate the importance of properly drafted legal instruments and documentation. Properly prepared offering documents — whether for a public sale or a private token offering — provides the team with the necessary flexibility to develop the project and plan token launch, pivot when needed, limit the liability of the core team to the extent possible, and address many typical conflicts and scenarios that have emerged in Web3 legal practice over the past years.

7. Apply Voluntary Compliance in Private Offerings

When conducting a private token offering, implement voluntary KYC/KYB checks on token purchasers, as well as KYT monitoring of all incoming crypto transactions. Prepare a list of restricted jurisdictions. Basic compliance helps ensure that the project does not engage with politically exposed persons (PEPs), sanctioned individuals, or residents of high-risk jurisdictions (such as those on the FATF blacklist), and that treasury funds are not derived from illicit sources. Later, when opening a corporate account on a centralized exchange or using fiat conversion services or bank accounts, you will be in a position to clearly demonstrate the origin of funds.

8. Review Public-Facing Materials Carefully

All marketing documentation, website interface, and language used in white paper and public statements must be carefully reviewed by legal counsel. Unless the project is offering a tokenized investment or financial product, avoid any language that could be interpreted as investment-related. Careless wording and promotional language can lead to serious regulatory exposure or even affect the legal classification of project token.

9. Structure Partnerships and Third-Party Arrangements Properly

When entering into partnerships with KOLs, advisors, marketing agencies, market makers, or exchanges always put agreements in writing. Clearly define expectations, deliverables, KPIs, and terms. The Web3 industry is still maturing and many agreements are poorly standardized, vague arrangements lead to conflicts. Attention to legal form at the outset helps prevent disputes later.

Where partnerships are complex and likely to require complex drafting and structuring, start with a short-term term sheet. A concise, one- to two-page document outlining both parties’ expectations allows you to test alignment early without incurring unnecessary legal fees. If you are not on the same page at this stage, there is no point proceeding to long-form contracts.

Phase Three: Preparing to Launch a Crypto Product

10. Build a Regulatory Launch Strategy Early

If you are launching a complex RWA product or decentralized finance (DeFi) application, or a DApp that involves embedded VASP functionality, tokenization instruments, or asset-referenced tokens, or if the project implies management of third-party funds or operates as a form of collective investment, or if the project is not fully decentralized – begin regulatory planning early.

There is rarely a one-size-fits-all approach. The same product, depending on its structure and presentation, may fall under different legal classifications and trigger different regulatory obligations. Regulatory treatment can vary significantly depending on jurisdiction, user and asset flow, custody model, and on-chain or of-chain logic. Think of this in advance.

Develop a regulatory strategy tailored to your product architecture, build a fit-for-purpose corporate structure, consider applying for relevant authorizations, and prepare clear, legally sound user-facing documentation. Doing so will help address regulatory risks, limit liability, and reduce personal exposure for the core team.

11. Conduct Open-Source Compliance and have Licensing Strategy

Web3 is built on openness, collaboration, and transparency. Many projects rely heavily on open-source components and often publish their code publicly. But open-source licensing brings legal responsibilities. Misunderstanding or violating license terms, even under the most common licenses like GNU GPL or MIT, can create significant legal and operational risk for your project. To avoid these issues:

• Establish and maintain an open-source policy aligned with your project’s roadmap and legal strategy.
• Educate your team on licensing compliance. Reputable resources such as the Linux Foundation’s Education Center are useful for training.
• Always verify the licenses of third-party code before use, and ensure your integration complies with those terms, including proper attribution where required.
• Carefully select the license for your own code. Copyleft licenses (e.g. GPLv3) and restrictive licenses (e.g. BUSL) can limit interoperability or disincentivize adoption. Choose with care and, where needed, consult experienced legal advisors.

For further guidance, refer to our detailed article: Open source in Web3: Lessons from the Andre Cronje and Aerodrome Finance Case

Phase Four: DAO Transition

Once tokens have been distributed and an engaged community has formed, transitioning to a DAO may be appropriate, especially for dApp and DeFi-related projects. A DAO structure allows the project to decentralize governance and can serve as a strategic response to various regulatory risks.

Legally, this usually involves shifting control from the original developer company to a new legal wrapper tailored to the DAO. This could be a foundation, a trust, or another jurisdiction-specific entity designed to house DAO assets, hold IP, and administer decisions made on-chain.

For a detailed framework on DAO legal architecture and migration planning, see our full guide: DAO 3.0: Ultimate DAO Legal Structuring in 2025 and Beyond.