OpenAI has scrapped its plans to transition into a for-profit organization. On Monday, the San Francisco-based artificial intelligence company revealed it will maintain its non-profit status after engaging in discussions with community leaders and legal representatives from two U.S. states. Nevertheless, the firm will evolve its for-profit division into a Public Benefit Corporation (PBC), enabling it to raise capital for the advancement of new technologies. OpenAI indicated that this PBC will be designed to align its mission with shareholder interests.
OpenAI to Transition From For-Profit LLC to a PBC
In a blog post, OpenAI Chairman Bret Taylor stated that the decision to maintain the non-profit structure followed talks with community leaders and the offices of the attorneys general in Delaware and California. This decision also comes in light of criticism from prominent individuals like Elon Musk and competing tech firms such as Meta.
The blog post featured a letter from OpenAI CEO Sam Altman directed at employees and stakeholders, detailing the company’s new path. Highlighting the existing demand for its technologies, he 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 new arrangement, OpenAI’s non-profit entity will oversee the organization as its largest stakeholder, while the for-profit arm transitions into a PBC that is capable of generating investor returns.
OpenAI initially established a for-profit limited liability company (LLC) in 2019 to attract outside investments. The newly formed PBC will strive to balance the generation of revenue alongside the company’s outlined mission. Other AI companies, like Anthropic and xAI, have similarly adopted the PBC framework.
The organization will also discontinue its existing capped-profit model. Previously, investors in OpenAI’s commercial sector were restricted by a cap of 100 times their investment returns, after which any surplus profits would be diverted back to the non-profit. Under the PBC structure, investors will receive standard equity that appreciates with the company’s growth. Altman stated that this alteration is designed to facilitate ongoing fundraising initiatives aimed at building infrastructure and chasing the ambitious goal of artificial general intelligence (AGI). “This is not a sale, but a change of structure to something simpler,” he clarified.
As the highest governing entity, the non-profit will own a significant share of the newly established PBC. The extent of its ownership will be assessed by independent financial consultants, according to Altman. Any funds acquired by the non-profit will be reinvested into AI programs that “benefit many different communities, consistent with the mission.”
