In a significant pivot that reshapes one of artificial intelligence's most influential organizations, OpenAI has abandoned its controversial proposal to convert into a standalone for-profit entity. Instead, the company will transform its commercial subsidiary into a Public Benefit Corporation (PBC) while maintaining oversight from its nonprofit parent board. This decision marks the latest chapter in OpenAI's ongoing search for a corporate structure that balances its ambitious technical goals with its founding mission of ensuring artificial general intelligence (AGI) "benefits all of humanity."
A Strategic Reversal Amid Regulatory Scrutiny
OpenAI chairman Bret Taylor announced the restructuring change following what he described as "constructive dialogue" with the Attorneys General of California and Delaware, both of whom have oversight authority over OpenAI's nonprofit status and could have legally blocked the previously planned conversion. The decision also comes after mounting criticism from various stakeholders, including co-founder Elon Musk, who had sued the company alleging that the proposed for-profit shift betrayed its original mission.
"OpenAI was founded as a nonprofit, is today a nonprofit that oversees and controls the for-profit, and going forward will remain a nonprofit that oversees and controls the for-profit. That will not change," CEO Sam Altman wrote in a company-wide memo dated May 2025.
The California Department of Justice confirmed in an unsigned email that it "is reviewing the new proposed plan" and remains "in continued conversations with OpenAI," highlighting the ongoing nature of regulatory oversight in this evolving landscape.
From Capped Profits to Uncapped Potential
Under OpenAI's original structure, established in 2019, the company operated as a "capped-profit" model where investors could earn up to 100 times their investment before excess profits would flow back to the nonprofit. This unusual arrangement aimed to balance the need for massive capital with the organization's mission-driven roots.
The new structure eliminates these profit caps entirely. OpenAI spokesperson Steve Sharpe confirmed that "investors and employees will own regular stock with no cap on how much it can appreciate," making it significantly easier for the company to raise additional funding. This change was reportedly a prerequisite for SoftBank's massive $30 billion investment announced in March 2025, which official documents revealed could have been reduced to $20 billion if OpenAI failed to restructure by year-end.
While removing profit caps, the nonprofit parent will receive an equity stake in the PBC subsidiary that will grow proportionally as the company's valuation increases. The nonprofit board will maintain control by appointing the PBC's board of directors.
The Capital Demands of AGI Development
At the heart of OpenAI's restructuring is the staggering capital required to build advanced AI systems. In his memo to staff, Altman estimated that bringing AGI to humanity would need "hundreds of billions of dollars and may eventually require trillions of dollars" in investment.
"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," Altman wrote, pointing to computing constraints that limit the company's ability to meet user demand. "As the systems become more capable, they will want to use them even more, for even more wonderful things."
The capital-intensive nature of frontier AI development has pushed OpenAI toward more traditional corporate structures. The company raised $40 billion in its most recent funding round, valuing it at approximately $300 billion, making it one of Silicon Valley's most valuable startups just a few years after the release of ChatGPT catapulted it to global prominence.
The Public Benefit Corporation Model
OpenAI's new commercial structure as a PBC represents a middle ground between pure profit-seeking and nonprofit operation. Public Benefit Corporations are legally required to consider their stated public mission alongside shareholder interests when making business decisions.
"PBCs have become the standard for-profit structure for other AGI labs like Anthropic and X.ai, as well as many purpose-driven companies like Patagonia," Altman noted in his memo. "We think it makes sense for us, too."
This structure aligns OpenAI with competitors in the AGI space while formalizing its commitment to what Altman calls "democratic AI"—a vision where artificial intelligence tools empower individuals across disciplines rather than concentrating power in the hands of a few.
The Musk Factor: Ongoing Legal Challenges
Despite this restructuring, OpenAI's legal challenges continue. Elon Musk, who departed the company in 2018, filed a lawsuit in March 2024 alleging that OpenAI's commercial pursuits violated its founding charter.
Following the PBC announcement, Musk's attorney Marc Toberoff issued a statement calling it "a transparent dodge that fails to address the core issues: charitable assets have been and still will be transferred for the benefit of private persons." He maintained that "the founding mission remains betrayed."
An unnamed OpenAI insider countered that Musk's "baseless lawsuit only proves that it was always a bad-faith attempt to slow us down," suggesting the legal battle may continue despite the restructuring.
"A Brain for the World": OpenAI's Evolving Vision
Throughout the restructuring discussions, Altman has consistently articulated a vision for AI that differs from the company's early days. Where some early collaborators envisioned powerful AI systems controlled by a small number of trusted experts, Altman now advocates for a more distributed approach.
"We now see a way for AGI to directly empower everyone as the most capable tool in human history," he wrote. "We want to build a brain for the world and make it super easy for people to use for whatever they want."
This philosophy of "democratic AI" represents an evolution from OpenAI's origins. Altman emphasized the company's intention to "open source very capable models" and give users "a great deal of freedom" in how they use OpenAI's tools "within broad boundaries."
Balancing Innovation, Capital, and Public Good
OpenAI's restructuring highlights the fundamental tension at the heart of frontier AI development: how to balance the enormous capital requirements and competitive pressures of cutting-edge technology with concerns about safety, ethics, and public benefit.
The revised structure attempts to thread this needle by maintaining nonprofit oversight while unlocking traditional investment mechanisms. The nonprofit will still control the commercial operation, but now gains an equity stake that theoretically aligns financial success with charitable impact.
"The nonprofit will continue to control the PBC, and will become a big shareholder in the PBC, in an amount supported by independent financial advisors, giving the nonprofit resources to support programs so AI can benefit many different communities," Altman explained.
Looking Forward: Implications and Open Questions
As OpenAI implements this new structure, several key questions remain:
-
Regulatory Approval: The California and Delaware Attorneys General must still formally approve the restructuring plan, and their ongoing review suggests potential modifications may be required.
-
Investor Reaction: While SoftBank and Microsoft's funding appears secure, how other investors and potential backers respond to the hybrid structure remains to be seen.
-
Competitive Positioning: Whether this structure helps or hinders OpenAI in the increasingly competitive race to develop artificial general intelligence against well-funded rivals.
-
Internal Alignment: After the tumultuous board conflict in late 2023 that briefly saw Altman ousted, questions persist about governance stability.
-
Mission Integrity: The ultimate test will be whether OpenAI can maintain its founding commitment to benefit humanity while operating with the intensity and capital efficiency of a Silicon Valley tech giant.
For now, OpenAI's decision represents a significant moment in the evolution of AI governance, suggesting that even as the capital requirements of frontier AI development continue to grow, the sector remains subject to unique scrutiny regarding the balance of power, profit, and public good.
"Creating AGI is our brick in the path of human progress," Altman concluded in his memo. "We can't wait to see what bricks you will add next."
You can read Altman’s full memo below:
OpenAI is not a normal company and never will be.
Our mission is to ensure that artificial general intelligence (AGI) benefits all of humanity.
When we started OpenAI, we did not have a detailed sense for how we were going to accomplish our mission. We started out staring at each other around a kitchen table, wondering what research we should do. Back then, we did not contemplate products, a business model. We could not contemplate the direct benefits of AI being used for medical advice, learning, productivity, and much more, or the needs for hundreds of billions of dollars of compute to train models and serve users.
We did not really know how AGI was going to get built, or used. A lot of people could imagine an oracle that could tell scientists and presidents what to do, and although it could be incredibly dangerous, maybe those few people could be trusted with it.
A lot of people around OpenAI in the early days thought AI should only be in the hands of a few trusted people who could “handle it”.
We now see a way for AGI to directly empower everyone as the most capable tool in human history. If we can do this, we believe people will build incredible things for each other and continue to drive society and quality of life forward. It will of course not be all used for good, but we trust humanity and think the good will outweigh the bad by orders of magnitude.
We are committed to this path of democratic AI. We want to put incredible tools in the hands of everyone. We are amazed and delighted by what they are creating with our tools, and how much they want to use them. We want to open source very capable models. We want to give our users a great deal of freedom in how we let them use our tools within broad boundaries, even if we don’t always share the same moral framework, and to let our users make decisions about the behavior of ChatGPT.
We believe this is the best path forward—AGI should enable all of humanity to benefit each other. We realize some people have very different opinions.
We want to build a brain for the world and make it super easy for people to use for whatever they want (subject to few restrictions; freedom shouldn’t impinge on other people’s freedom, for example).
People are using ChatGPT to increase their productivity as scientists, coders, and much more(opens in a new window). People are using ChatGPT to solve serious healthcare challenges they are facing and learn more than ever before. People are using ChatGPT to get advice about how to handle difficult situations. We are very proud to offer a service that is doing so much for so many people; it is one of the most direct fulfillments of our mission we can imagine.
But they want to use it much more; 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. As the systems become more capable, they will want to use it even more, for even more wonderful things.
We had no idea this was going to be the state of the world when we launched our research lab almost a decade ago. But now that we see this picture, we are thrilled.
It is time for us to evolve our structure. There are three things we want to accomplish:
We made the decision for the nonprofit to stay in control after hearing from civic leaders and having discussions with the offices of the Attorneys General of California and Delaware. We look forward to advancing the details of this plan in continued conversation with them, Microsoft, and our newly appointed nonprofit commissioners.
OpenAI was founded as a nonprofit, is today a nonprofit that oversees and controls the for-profit, and going forward will remain a nonprofit that oversees and controls the for-profit. That will not change.
The for-profit LLC under the nonprofit will transition to a Public Benefit Corporation (PBC) with the same mission. PBCs have become the standard for-profit structure for other AGI labs like Anthropic and X.ai, as well as many purpose driven companies like Patagonia. We think it makes sense for us, too.
Instead of our current complex capped-profit structure—which made sense when it looked like there might be one dominant AGI effort but doesn’t in a world of many great AGI companies—we are moving to a normal capital structure where everyone has stock. This is not a sale, but a change of structure to something simpler.
The nonprofit will continue to control the PBC, and will become a big shareholder in the PBC, in an amount supported by independent financial advisors, giving the nonprofit resources to support programs so AI can benefit many different communities, consistent with the mission. And as the PBC grows, the nonprofit’s resources will grow, so it can do even more. We’re excited to soon get recommendations from our nonprofit commission on how we can help make sure AI benefits everyone—not just a few. Their ideas will focus on how our nonprofit work can support a more democratic AI future, and have real impact in areas like health, education, public services, and scientific discovery.
We believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone. Creating AGI is our brick in the path of human progress; we can’t wait to see what bricks you will add next.
Sam Altman,
May 2025
Post a Comment