OpenAI has announced a reversal of its prior intentions to reform into a for-profit company. The artificial intelligence (AI) organization, headquartered in San Francisco, revealed on Monday that it will retain its non-profit status after consultations with civic leaders and legal advisors from two U.S. states. Instead, it will convert its for-profit segment into a Public Benefit Corporation (PBC), allowing it to continue seeking capital for technological advancements while still meeting its mission and serving its shareholders.
OpenAI to Transition From For-Profit LLC to a PBC
In a blog entry, OpenAI Chairman Bret Taylor detailed that the choice to maintain the non-profit model was influenced by discussions with municipal leaders and the attorneys general from Delaware and California. This decision comes amid criticisms from notable figures, including Elon Musk and competing technology companies such as Meta.
The blog post featured a message from OpenAI CEO Sam Altman directed at employees and stakeholders, highlighting the growing demand for its technology. Altman noted, “We currently cannot supply nearly as much AI as the world wants, and we have to put usage limits on our systems and run them slowly.”
With the newly established framework, OpenAI’s non-profit entity will oversee the organization as its principal shareholder, while the transitioned for-profit sector will operate as a PBC, capable of providing financial returns to its investors.
OpenAI originally formed a for-profit limited liability company (LLC) in 2019 to draw external investments. The new PBC framework seeks to harmonize revenue generation with the company’s overarching mission. It is worth mentioning that other AI entities like Anthropic and xAI have also opted for the PBC structure.
The organization will discontinue its previous capped-profit model, which limited returns for investors in its commercial branch to 100 times their investment, with excess profits redirected to the non-profit entity. Under the PBC structure, investors will possess standard equity that can appreciate with company growth. Altman emphasized that this transition is not a sale but a structural change designed to simplify operations.
The non-profit entity will serve as OpenAI’s ultimate governing authority and will hold a significant stake in the new PBC, with the extent of its ownership to be determined by independent financial advisors, as noted by Altman. Any funds acquired by the non-profit are intended to support AI initiatives that “benefit many different communities, consistent with the mission.”
