Vermont Blockchain-Based LLC (BBLLC): Complete Guide for DAO Founders (2026)

By Jillian Dupree, State LLC Service. April 20, 2026.

Disclosure: I write for State LLC Service.

DAOs have been sued into vague regulatory territory for a decade. Token holders, protocol operators, treasury signers, and smart contract deployers have all been named as defendants in actions where the underlying question was: who, exactly, is the legal entity here? In 2018, Vermont passed a statute that tried to answer that question at the state level. It is still the first of its kind in the United States, and most crypto founders have never heard of it.

Vermont's Blockchain-Based LLC, or BBLLC, lives in 11 V.S.A. Chapter 25, Subchapter 12, specifically sections 4171 through 4174. The statute was enacted through S.269, Act 205 of 2018, which Governor Phil Scott signed on May 30, 2018, effective July 1, 2018. If you are a DAO founder, a DeFi protocol operator, a treasury multisig holder, or a smart contract deployer who wants a U.S. entity wrapper with some statutory recognition of on-chain governance, this article is for you.

This is a long read. Roughly 2,000 words. No shortcuts, because the regulatory surface is complicated and the wrong structure at the wrong time is expensive.

What a BBLLC Actually Is

A Blockchain-Based LLC is a Vermont limited liability company that has elected, at formation or later, to operate under Vermont's BBLLC subchapter. The election tells the Vermont Secretary of State, and anyone reading the articles of organization, that this entity's governance, finances, or operations run in whole or in material part through one or more blockchain networks, distributed ledgers, or smart contracts.

Ordinary LLC law assumes a boardroom. Members vote, minutes get recorded, the operating agreement is a Word document someone signs. Vermont's BBLLC subchapter acknowledges a different reality: in an on-chain organization, governance rules may be encoded in a smart contract, votes may be cast by token holders, treasury disbursements may execute automatically when quorum conditions are met, and the composition of the membership may shift every time a token transfers.

The BBLLC subchapter is designed to give those mechanics a recognized legal standing inside a Vermont LLC wrapper. The entity remains an LLC. Members keep limited liability protection. The state's standard LLC law still applies. What the subchapter adds is explicit statutory recognition that the governance layer can live on-chain.

Act 205 of 2018, First-in-Nation

Vermont was the first U.S. state to enact a dedicated blockchain LLC statute. The bill, S.269, was introduced in January 2018 and signed into law that May. It was part of a broader package aimed at positioning Vermont as a blockchain-friendly jurisdiction, alongside legislation on blockchain-based records and the state land records study.

The statute itself is short. Four sections. Section 4171 defines terms. Section 4172 governs the BBLLC election. Section 4173, titled "Authority; requirements," does the substantive work: it spells out what the operating agreement must contain. Section 4174 covers the relationship between the BBLLC and Vermont's general LLC Act.

Per 11 V.S.A. section 4173, a BBLLC's operating agreement must, at a minimum:

• Summarize the mission or purpose of the entity.
• Specify whether the ledger is fully or partially decentralized, and fully or partially public or private, including access and read/write permissions.
• Adopt voting procedures, which may be carried out through smart contracts, to handle proposals, software or protocol upgrades, and governance changes.
• Adopt protocols for responding to security breaches and integrity failures in the underlying blockchain technology.
• Describe how a person becomes a member, and how membership interests are denominated (units, shares, tokens, or other forms).
• Specify the rights and obligations of each group of participants, including who has member and manager rights.

That is more prescriptive than a standard Vermont LLC. A typical LLC operating agreement can be three pages or three hundred. A BBLLC operating agreement has a statutory floor of topics it must cover. In practice, that is a feature, not a bug: the required topics are exactly what a responsible DAO or protocol company should be putting in writing anyway.

Vermont BBLLC vs. Wyoming DAO LLC vs. Delaware C-Corp

Three jurisdictions dominate the conversation for crypto-adjacent U.S. entity wrappers. Each one solves a different problem.

When a BBLLC Actually Fits

Strong candidates for the Vermont BBLLC:

• DAOs with active on-chain governance. If your token holders vote on real proposals, and those votes execute automatically through a smart contract, the BBLLC operating agreement requirements map to your reality. Section 4173's required topics are the topics you should be writing down anyway.
• Protocol treasury holders. A multisig wallet that disburses funds based on on-chain governance is exactly the kind of structure the subchapter contemplates. Giving that treasury an LLC wrapper with statutory recognition of the smart contract layer is cleaner than trying to shoehorn it into a standard operating agreement.
• Smart contract deployers operating jointly. Two or three engineers who deployed a protocol together and need a legal entity to hold the fees, receive grants, and sign vendor contracts can use a BBLLC to formalize the on-chain split without pretending the governance is off-chain.
• Crypto funds with on-chain investment vehicles. Funds that allocate capital through smart contracts and vote on deployments on-chain can use the BBLLC wrapper, though fund structure usually involves a separate Delaware or Cayman vehicle for LP-facing work.

When a BBLLC Does Not Fit

Not every crypto-adjacent business should form a BBLLC. A few common cases where it is the wrong tool:

• Single-operator crypto businesses. A solo trader, a single NFT artist, or a one-person smart contract auditor does not need on-chain governance. A standard LLC in a privacy-friendly state does the job at a fraction of the complexity.
• Trading LLCs. An entity whose only purpose is to buy and sell digital assets does not have on-chain governance to formalize. The BBLLC subchapter assumes blockchain technology runs the governance, not just the balance sheet.
• NFT creators without a protocol. If you are minting and selling collections but there is no DAO, no treasury governance, no token holders voting on anything, the BBLLC framework adds paperwork without adding legal clarity.
• Projects that are really Delaware C-Corps in disguise. If you are raising a priced round, you are almost certainly forming a Delaware C-Corp at some point. A BBLLC may serve an early foundation or treasury layer, but the investor vehicle is likely somewhere else.

The Practical Walkthrough

What it actually looks like to form one.

Step 1. The articles of organization

You file articles of organization with the Vermont Secretary of State, selecting BBLLC status. The filing fee is $155, per sos.vermont.gov as of April 2026. You also need a registered agent with a Vermont street address.

Step 2. The operating agreement

This is where the real work lives. Section 4173 requires the operating agreement to address mission, ledger type and permissions, voting procedures, security protocols, membership mechanics, and participant rights and obligations. Generic templates will not hold up. The document has to describe your actual on-chain governance, which means you are writing a legal document that tracks your smart contracts.

Step 3. The blockchain-governance terms

The voting procedures section is where most founders spend their drafting time. You are specifying how on-chain votes translate to legally binding entity decisions: quorum thresholds, proposal types, upgrade procedures, emergency protocols. If the smart contracts and the operating agreement disagree, you have a problem. Reconciling them in advance is the point.

Step 4. The registered agent

A Vermont BBLLC has the same registered agent requirement as any Vermont LLC. A commercial registered agent with a physical street address in Vermont satisfies the requirement. The agent receives service of process and state mail on behalf of the entity.

Step 5. Annual maintenance

Vermont's annual report is $45, per sos.vermont.gov. It is due annually, confirming the entity's current address, registered agent, and management information. Missing the report, in Vermont as in any state, risks administrative dissolution.

Tax Treatment

A BBLLC is taxed like any other LLC by default. Single-member BBLLCs are disregarded entities for federal tax purposes. Multi-member BBLLCs are partnerships. Both options pass income through to members, who report it on their own returns. An LLC can also elect S-corporation or C-corporation treatment on federal Form 8832, which is occasionally useful but rarely the first choice for a DAO or protocol company.

Vermont imposes a state income tax. Members who are Vermont residents may owe Vermont tax on their share of pass-through income. Members in other states generally owe tax in their own state, and the BBLLC may have Vermont-source income depending on where activities are sourced. A CPA familiar with multi-state LLCs and digital asset taxation is a better conversation partner than an article. Tax outcomes depend on your individual circumstances.

Where the IRS and SEC Currently Stand on DAOs

The federal picture is not settled. A few data points worth knowing, all of which may shift:

• The SEC has, over the last several years, taken the position in multiple enforcement actions that tokens distributed by protocol operators may constitute unregistered securities offerings. Whether a given DAO's token triggers securities treatment is a fact-specific question.
• The IRS treats digital assets as property. Token distributions, governance airdrops, and treasury disbursements can trigger taxable events for the recipient, the entity, or both, depending on structure.
• FinCEN has regulated money services businesses for years, and in 2024 and 2025 expanded reporting regimes that touch entities holding or transferring digital assets at scale.
• The Corporate Transparency Act's beneficial ownership reporting regime has been through multiple federal court challenges and a FinCEN interim final rule in March 2025 that narrowed reporting to foreign entities. Domestic BBLLCs are, for now, outside the current BOI reporting obligation, though the law's status has moved more than once.

The BBLLC is a state entity structure. It does not answer any federal question. If your project issues tokens, operates a treasury, or distributes governance rights, the federal regulatory analysis is a separate conversation with a qualified attorney who specializes in digital assets. In our view, most DAO founders underspend on that conversation and overspend on state filings.

Our Take

Opinion section, clearly labeled.

Vermont did something in 2018 that no other state had done: it took on-chain governance seriously enough to write a statute. The BBLLC subchapter is short, practical, and surprisingly well-matched to the actual governance documents a serious DAO should produce. The required topics in section 4173 are a checklist worth running through even if you end up forming in another state.

Wyoming came later and now has the larger practitioner base, the broader community recognition, and the zero state income tax. For most DAOs without a specific reason to be in Vermont, Wyoming is the practical default. But Vermont's BBLLC is not a novelty or a museum piece. It is a legitimate choice, especially for projects whose founders have a Vermont connection, who value being first in a statute that has had years to settle, or who want the operating-agreement rigor that section 4173 imposes.

What we believe, overall: the state entity choice is downstream of the governance design and the federal regulatory picture. Get the smart contracts and token model legally analyzed first. Then pick the wrapper. The right BBLLC conversation starts with "here is how our governance actually works," not "which state is cheapest."

What to Do in the Next 24 Hours

If you are a DAO founder or protocol operator reading this with a live project and no legal wrapper, three concrete moves:

1. Read 11 V.S.A. section 4173 directly. It is short. Six required operating-agreement topics. Map each one to your current governance.
2. Write down, in plain language, how a proposal moves from idea to executed on-chain action in your organization today. If you cannot write it down, your smart contracts and your governance are diverging.
3. Talk to a licensed attorney who has formed at least one BBLLC or Wyoming DAO LLC. Generalist formation help is not enough here.