The Legal Aspects to consider for doing business in Web3

The legal obstacles in Web 3 are expanding along with the commercial and marketing potential.
1. Lack of Legal Entities in Web 3: You should work with multiple legal entities if you are planning a business venture in web 3. The main advantage of collaborating with several legal organizations for Web3 businesses is liability protection. Consider creating an LLC or S company for the project and a second legal entity to manage your initial NFT drop.
2. Tax Liability in Web 3: NFTs smart contracts ensure that in addition to the money you make initially from the NFT, you can also make profits whenever one of your NFT is traded. Every single transaction can be taxable. So, you’ll have to work to minimize your tax liability.
3. NFT Security Laws: Your NFT project must also align with the Security and Exchange Commission (SEC). It must pass the Howey test that considers – involvement of monetary investment, a general venture, profit expectations, and a legit person behind the project.
4. Intellectual Property Rights: IP rights basically define copyrights on a piece of content. Many third parties are reported using other people’s IDs to develop virtual offices in the metaverse, create new NFTs, etc. – that too without their permission. And, this does not fall under the Fair Use Doctrine.
5. Rights Surrounding DAOs: DAO – Decentralized Autonomous Organization, run by the members, but the rules are encoded as a computer program. The legalities around DAOs are yet unclear, as these haven’t been tested in a court of law till now.
Planning to take a dip in Web 3? Consider the legal implications first!