Legal Structuring for 3UTxO: Establishing a Compliant, Tax-Efficient, and Secure Entity

[GENERAL] Name and surname of main applicant

Florian Pittini

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

Entity (Not Incorporated)

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

6

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language

No

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

Engage legal experts to research and design a compliant, tax-efficient structure for 3UTxO, ensuring regulatory adherence and asset protection, while selecting the most favorable jurisdiction.

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

Yes

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

We have dependencies with third-party provider.

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] Please provide here more information on the open source status of your project outputs

We will make everything open source as long as the third-party provider agrees, all our internal research will be shared with the community.

[METADATA] Horizons

Legal

[SOLUTION] Please describe your proposed solution

3UTxO aims to become an Evergreen Venture Capital Fund funded through the Cardano Treasury, with a mission to actively invest in companies and tokens within the Cardano ecosystem. As an Evergreen Fund, we will reinvest returns to ensure long-term sustainability, while contributing a portion of our profits back to the Treasury to further support the ecosystem. We will collaborate with other VCs, bringing them into the Cardano network, and promote Cardano at venture capital events to increase visibility and adoption. Creating a solid legal and tax-efficient structure is fundamental to achieving our goals in these areas. Our approach involves several key steps:

1.) Engage Legal Experts and Advisors: We will collaborate with experienced lawyers specializing in blockchain technology, tax law, and international corporate structuring. Their expertise will help identify the optimal jurisdiction and legal framework to ensure compliance, minimize tax exposure, and protect assets.

2.) Conduct Comprehensive Legal Research: Our team, in conjunction with the hired legal experts, will perform an in-depth analysis of various jurisdictions. This research will focus on:

• Identifying jurisdictions with favorable regulations for blockchain entities.
• Analyzing tax implications to avoid taxable events for the treasury.
• Reviewing legal precedents to understand how similar entities have been structured successfully.

3.) Develop a Comprehensive Legal Framework: Based on our research findings, we will design a legal structure that:

• Ensures compliance with regulations specific to blockchain technology.
• Minimizes tax liabilities, maximizing the treasury’s sustainability.
• Provides legal protection for the organization and its stakeholders, ensuring accountability.

4.) Establish the Legal Entity: Once the optimal jurisdiction and structure are identified, we will proceed with the formal registration and setup of 3UTxO’s legal entity. This will include completing necessary filings, implementing the agreed-upon structure, and ensuring all compliance requirements are met.

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

1.) Protects Treasury Assets

By establishing a legally secure and compliant structure, 3UTxO ensures that the treasury assets are protected against potential legal and financial risks. This safeguards funds that will be reinvested into the Cardano ecosystem, supporting its long-term growth and development.

2.) Minimizes Tax Liabilities

Through strategic legal research and structuring, we aim to minimize taxable events for 3UTxO’s treasury. By doing so, we maximize the resources available for investment, allowing more funds to be directed toward Cardano-based projects and initiatives.

3.) Ensures Stakeholder Accountability

The legal framework developed will include clear roles and responsibilities, holding stakeholders accountable to the community and investors. This transparency builds trust and confidence, setting a standard for governance and responsibility within the Cardano ecosystem.

4.) Long Term Impact of 3UTxO

The long-term impact of 3UTxO will be transformative for the Cardano ecosystem. As an Evergreen Venture Capital Fund structure, 3UTxO will provide a continuous flow of capital to innovative projects and startups within the ecosystem, driving growth and encouraging new developments in blockchain technology and decentralized finance. By reinvesting profits and returning a portion to the Cardano Treasury, 3UTxO ensures sustainable funding for future generations of projects, creating a self-perpetuating cycle of innovation. Additionally, by fostering collaboration with external VCs and raising Cardano’s profile at global venture capital events, 3UTxO will attract new investors, increase adoption, and solidify Cardano’s position as a leading blockchain platform. This proposal lays the foundations for the successful development of 3UTxO

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

Waffle Capital’s team is composed of experienced leaders with proven success in the Cardano ecosystem. Florian, from NEWM, and Youry, from Waffle Capital, have strong reputations and have successfully delivered previous Catalyst proposals, demonstrating their capability to manage and execute projects effectively.

Additionally, Waffle Capital has a track record of successfully setting up a fund, showcasing their expertise in legal structuring, fund management, and navigating regulatory landscapes. This experience equips them with the skills needed to establish a compliant and efficient structure for 3UTxO.

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

Establish Team and Delegate Responsibilities (1 Month)

Objective: Form a team of internal stakeholders and legal experts to manage the legal structuring process and delegate key responsibilities.

Activities:

• Confirm the core team members
• Assign roles and responsibilities for team members to manage communication, research, and coordination.

Acceptance Criteria:

• Members focused on this proposal confirmed and announced.

Conduct General Research and Narrow Down Jurisdiction Options (2 Months)

Objective: Perform comprehensive legal research to identify the most favorable jurisdictions for 3UTxO’s entity formation.

Activities:

• Engage with legal experts to explore multiple jurisdictions based on regulatory frameworks, tax implications, and blockchain regulations.
• Narrow down the list to the top jurisdictions based on findings.
• Document findings for internal review and decision-making.

Acceptance Criteria:

• Internal report prepared outlining the most suitable jurisdictions (kept confidential)
• Announcement of shortlisted jurisdictions.

Hire Legal Firm for In-Depth Research and Finalization (2 Months)

Objective: Engage a legal firm to conduct detailed research and finalize the optimal jurisdiction and structure for 3UTxO.

Activities:

• Evaluate and hire a legal firm specializing in international corporate structuring and blockchain compliance.
• Collaborate with the legal firm to refine the research on chosen jurisdictions.

Acceptance Criteria:

• Signed agreement with the selected legal firm (evidence provided through documentation such as a screenshot)

N.A.

N.A.

Establish Legal Entity and Finalize Company Setup (1 Months)

Objective: Formally establish the legal entity based on the finalized structure, ensuring compliance and tax efficiency.

Activities:

• Complete the registration process in the chosen jurisdiction.
• Implement the legal and tax structures recommended by the legal firm.

Acceptance Criteria:

• Official registration of the legal entity.
• Documentation of the company setup, including registration and compliance records.
• Public announcement confirming the successful establishment of the entity.

[RESOURCES] Who is in the project team and what are their roles?

Florian, Co-Founder and Co-CEO of NEWM, brings a diverse background in entrepreneurship, technology, and venture capital to the project. Florian will lead the proposal, managing the operations and ensuring that all milestones are achieved efficiently. He will coordinate the legal hires and oversee the structuring process to align with 3UTxO’s objectives. Florian’s role is to maintain a clear timeline and delegate tasks effectively, ensuring that the project stays on track.

Youry, Founder of Waffle Capital, has vast experience in tech, blockchain, and entrepreneurship. Leveraging his holistic understanding of the ecosystem, he will play a crucial supporting role as a Strategic Advisor, providing guidance on key decisions. Youry will also utilize his extensive network to connect the project with the necessary partners and resources, ensuring that the legal structuring process aligns with 3UTxO’s strategic objectives.

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

Milestone 1: Establish Team and Delegate Responsibilities (1 Month)

Activities:

• 5,000 ADA - Confirm core team members and advisors.
• 5,000 ADA - Establish project management tools and systems.
• Total Budget: 10,000 ADA

Milestone 2: Conduct General Research and Narrow Down Jurisdiction Options (2 Months)

Activities:

• 15,000 ADA - Engage legal advisors for jurisdiction research.
• 10,000 ADA - Analyze regulatory environments, tax implications, and blockchain regulations.
• 5,000 ADA - Narrow down and document preferred jurisdictions.
• Total Budget: 30,000 ADA

Milestone 3: Hire Legal Firm for In-Depth Research and Finalization (2 Months)

Activities: 

• 15,000 ADA - Engage and hire the legal firm.
• 5,000 ADA - Collaborate with the firm to refine the legal structure.
• Total Budget: 20,000 ADA

Milestone 4 (Final Milestone): Establish Legal Entity and Finalize Company Setup (1 Months)

Activities:

• 20,000 ADA - Complete company registration and filing fees.
• 20,000 ADA - Implement legal and tax structures, ensuring regulatory compliance.
• 
  
• Total Budget: 40,000 ADA

[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

This project delivers value to the Cardano ecosystem by creating a legally compliant, tax-efficient, and secure structure for 3UTxO. The investment in comprehensive legal research and professional setup ensures a solid foundation for sustainable operations, minimizing risks and optimizing opportunities for future growth and investment.