If You're Moving Money Without a Legal Entity, You're the Liability

Any open-source team that receives funding, pays contributors, or holds a treasury should have a legal entity. Without one, individual contributors bear personal liability for the project's activities — and most teams don't realize this until it's too late.

Open-source teams often begin with a shared goal rather than a shared structure. A project forms around a DAO grant, sponsorships and donations, and ongoing work is funded through a multisig or someone's personal bank account. Most teams have the tools to ship and a way to move money, but not the operational and legal setup to do it safely.

That gap between "we can move money" and "we're set up to move money properly" is where the risk lives.

The Risk You're Already Taking

As soon as money flows, the absence of a legal structure stops being a philosophical choice and starts becoming a practical risk.

Operating without any formal wrapper usually means that real people are exposed by default. If something goes wrong — whether it's a dispute with a contributor over compensation, a misunderstanding about who owns what, or a regulatory question — there is no separate project to respond.

Responsibility lands on individuals, often on whoever happens to be most visible or most involved. Here's a concrete scenario: an open-source project with seven contributors receives a $200K grant. The funds land in a multisig. Contributors get paid monthly, some in stablecoins, some by invoice. Six months later, there's a disagreement about deliverables, or a tax authority asks who received the funds. Without a legal entity, there's no project to point to. There's just people — and one of them is going to be held responsible.

Even well-intentioned teams tend to underestimate how quickly personal liability can enter the picture once money and ongoing commitments are involved.

Define It or Have It Defined for You

At that point, teams effectively face a choice. They can leave their activities unstructured and accept that, if a conflict arises, the structure will be imposed from the outside. That structure may come from a plaintiff, a regulator, or another adversarial actor, and it will not be designed with the project's values or operating realities in mind.

The alternative is to define that structure proactively, in a way that reflects how the team actually works and allows it to engage with the outside world on its own terms.

For open-source projects, whether building developer tooling, protocol infrastructure, or public goods, this decision point usually arrives faster than expected. The moment a project has recurring contributors, recurring income, or both, the informal setup starts showing cracks.

What Does a Legal Entity Actually Do for a Builder Team?

For open-source builders and teams working on public goods, a legal entity is not a symbol of formality. It's a practical tool. At a basic level, a legal structure creates separation between the people involved and the activities they are running. It provides a clear place for responsibility to sit, rather than letting it default to individuals.

In practice, a legal entity enables a team to:

• Sign contracts with contributors, service providers, and partners without improvisation each time
• Receive grants and funding from foundations, sponsors, and ecosystem programs with a proper invoicing counterparty
• Hold a treasury and manage assets in a way that survives changes in team composition
• Own intellectual property so that project IP doesn't depend on any single contributor
• Pay contributors compliantly across borders, whether in fiat or crypto
• Produce financial reporting that grant providers and partners increasingly expect

For projects meant to outlive any single contributor, this continuity matters. When a grant provider asks for an invoice or a contributor needs a formal agreement, there's a clear counterparty to provide it — instead of an awkward scramble to figure out who signs.

Just as importantly, structure helps clarify relationships. Internally, it creates clearer expectations around roles, compensation, decision-making, and dispute resolution. Externally, it gives grant providers, sponsors, and partners a defined counterparty to work with. Instead of relying on informal understandings, both sides know who they are dealing with and on what terms.

Does Forming a Legal Entity Mean Going Corporate?

This is the concern that holds most teams back — and it's worth addressing directly.

Forming a legal entity doesn't mean raising venture capital, monetizing your users, or abandoning the open-source ethos. It doesn't require giving up pseudonymity or changing how you build. It means having a container that protects the people doing the work.

For many builder teams, the right structure is lighter than they expect. Swiss associations, for example, have become a strong fit for open-source and public goods teams. They're flexible by design, can be created and wound down cleanly, and don't require public disclosure of members. They're cost-efficient, internationally recognized, and well suited to activities like receiving grants, handling crypto income, and paying contributors across borders — without the overhead of a traditional company.

The point isn't to add bureaucracy. It's to reduce uncertainty, protect contributors, and create a stable foundation for work that is already happening.

Once money moves, that foundation stops being optional.

What to Do Next

If your team is receiving funding, paying contributors, or holding a treasury without a legal entity, you're carrying risk that doesn't need to be there.

Achra's Operational Hub provides a turnkey operational setup for builder teams — legal entity formation, invoicing, contributor payouts, accounting, and compliance — bundled so you don't have to piece it together yourself. It's designed specifically for open-source, globally distributed teams that want to operate properly without slowing down.

Learn how Operational Hub works or check out Achra to see what we're building.

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