The default outcome without one: general partnership exposure
A DAO with no formal legal entity behind it doesn't exist in a legal vacuum just because it's 'decentralized', in many jurisdictions, a group of people acting together toward a common (including profit-related) purpose without a formal entity can be treated by default as something like a general partnership. That classification matters enormously: in a general partnership, partners typically bear personal, and sometimes joint, liability for the obligations and actions of the partnership, including obligations they didn't personally create or even know about. Applied to a DAO, that risk means token holders or active participants who thought they were merely 'voting on a protocol' could, in principle, be treated as having personal exposure to the DAO's liabilities, well beyond the value of the tokens they hold.
This is genuinely one of the more counterintuitive facts about running or participating in a DAO: 'decentralized' as a technical and cultural description of how decisions get made says nothing, by itself, about limited liability, which is a specific legal protection that has to come from a recognized legal structure. Limited liability isn't automatically granted to a group just because no single person controls it, it's a status that legal systems confer on entities that meet specific formal requirements, like properly formed corporations or LLCs. Without deliberately obtaining that status, a DAO's default legal treatment can be considerably less favorable than its participants assume.