on plans to become a more conventional for-profit company after facing mounting pressure from former employees, academics and rivals, including
.
The
said Monday that it’s moving forward with an
its for-profit division as a public benefit corporation, but the overall business will instead remain under the control of its
— a major shift in its plans that will effectively maintain the contours of how OpenAI is currently set up.
“We made the decision for the nonprofit to retain control of OpenAI after hearing from civic leaders and engaging in constructive dialogue with the offices of the Attorney General of Delaware and the Attorney General of California,” OpenAI board chairman Bret Taylor said in a statement, referring to two states tasked with reviewing the restructure. “We thank both offices and we look forward to continuing these important conversations.”
The startup was founded a decade ago as a nonprofit with a mission to
that benefits humanity. Four years later, OpenAI created a for-profit subsidiary to help fund the high costs of AI development. In December, OpenAI said it was evaluating a plan to turn its business into a public benefit corporation while retaining a nonprofit arm that would own shares in the for-profit entity but no longer control it.
A simplified for-profit structure is considered more attractive to investors, but on a call with reporters Monday, OpenAI chief executive
said the revised approach would still accomplish the same aim — even with the nonprofit still in charge.
“I think it just sets us up to be a more understandable structure, and to do the things that a company like ours has to do,” Altman said. “I won’t pretend that it wouldn’t maybe be easier if we were a fully normal company, but the mission comes first,” he added. “We believe this is well over the bar of what we need to be able to fund-raise.”
As part of OpenAI’s massive new US$40 billion funding round, the startup also has a strong incentive to finalize the corporate shift quickly. If its restructuring isn’t completed by the end of the year, lead investor
would have the option to reduce its total contribution to US$20 billion from US$30 billion, and OpenAI could seek additional investors to add to that sum, Bloomberg News previously reported.
Altman said on the call that SoftBank will not freeze the rest of its funding with the new structure. OpenAI also announced it will remove a cap on the financial returns its investors can earn, a move likely to appeal to current and future backers.
While OpenAI expects to bring in US$12.7 billion in revenue this year, it continues to spend heavily to train and support cutting-edge AI models. A single state-of-the-art AI system can cost billions of dollars to build.
Daren Shaver, a San Francisco-based partner at law firm Hanson Bridgett LLP, said the company’s decision sounds like a way to preserve its nonprofit status while working to get more outside capital and offer investors a return on their investments.
“At the same time the scrutiny is going to be, ‘Is this corporation really serving the public benefit?’ The opposite side of the coin is going to be, ‘Is it serving too much of a private benefit?’” he said. “That’s a term of art under the tax law.”
Rose Chan Loui, executive director at the Lowell Milken Centre for Philanthropy and Nonprofits at University of California at Los Angeles School of Law, said it remains to be seen how much control the nonprofit retains over OpenAI’s development of cutting-edge AI. “I think the devil’s going to be in the details,” she said.
OpenAI’s restructuring plans faced strong opposition in recent months. Musk, an OpenAI co-founder, previously made an unsolicited and unsuccessful US$97.4 billion bid to buy the assets of the nonprofit that controls OpenAI. He also asked a judge to block OpenAI from becoming a for-profit business. The judge rejected Musk’s request but has allowed parts of his lawsuit to proceed. (OpenAI has said Musk is trying to slow it down to benefit his rival AI startup.)
Marc Toberoff, an attorney for Musk, did not respond to a request for comment.
A dozen former OpenAI staffers had also objected to the startup’s prior restructuring plan, as well as Nobel laureate and AI “godfather” Geoffrey Hinton. Some of the employees have previously raised concerns about OpenAI’s ability to balance safety versus commercializing its technology.
“OpenAI’s commitment to nonprofit control is a win for responsible AI development,” said Todor Markov, a former OpenAI employee who now works at rival Anthropic and previously signed a public letter criticizing the restructure. “We need strong guardrails, not just good intentions. The details matter, and we’ll be watching closely to ensure this control remains more than just words on paper.”
—With assistance from Rachel Metz.
