OpenAI will shift its for-profit LLC, which was created in 2019, into a Public Benefit Corporation (PBC).
OpenAI will now operate as a Public Benefit Corporation with its non-profit as the main shareholder
Photo Credit: Reuters
OpenAI has dropped its plans to restructure as a for-profit company. On Monday, the San Francisco-based artificial intelligence (AI) firm announced that it would remain a non-profit entity following discussions with civic leaders and legal counsel from two US states. However, the company will transition its for-profit arm into a Public Benefit Corporation (PBC), which will allow it to continue raising capital to fund the development of new technologies. OpenAI said the PBC will be structured to serve both its mission and shareholders.
In a blog post, OpenAI Chairman Bret Taylor said the decision to retain the non-profit structure came after conversations with civic leaders and the offices of the attorneys general of Delaware and California. The move also comes amid criticism from figures including Elon Musk and rival tech firms like Meta.
The post included a letter from OpenAI CEO Sam Altman to employees and stakeholders outlining the company's revised direction. Emphasising the current demand for its technology, he said: “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.”
Under the new structure, OpenAI's non-profit entity will govern the company as its largest shareholder, while the for-profit arm will be converted into a PBC that can generate returns for investors.
OpenAI first set up a for-profit limited liability company (LLC) in 2019 to attract outside investment. The new PBC will aim to balance revenue generation with the company's stated mission. Notably, other AI firms such as Anthropic and xAI have also adopted a PBC model.
The company will also eliminate its existing capped-profit mechanism. Previously, investors in OpenAI's commercial arm were subject to a 100x cap on returns, after which profits would be redirected to the non-profit. With the shift to a PBC, investors will instead hold standard equity, which can increase in value with the company's growth. Altman said this change is intended to support ongoing fundraising efforts to build infrastructure and pursue artificial general intelligence (AGI), which remains the company's long-term goal. “This is not a sale, but a change of structure to something simpler,” he added.
The non-profit will remain OpenAI's highest governing body and become a significant shareholder in the new PBC. The size of its holding will be determined by independent financial advisors, Altman said. Any proceeds received by the non-profit will be used to support AI programmes that “benefit many different communities, consistent with the mission.”
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