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Published on
May 6, 2025
5 min read
OpenAI Abandons For-profit Push, Maintains Nonprofit Control as it Caves to Pressure
OpenAI has announced that it will maintain its status as a nonprofit. According to Yahoo Finance, OpenAI’s nonprofit control decision comes after the public raised safety concerns and criticized its efforts to convert into a for-profit entity. The startup also faced a lawsuit concerning its AI business model change.
OpenAI’s Nonprofit Governance
News about OpenAI’s decision was shared by its board chairperson and co-founder Bret Taylor on its website. In the post, Taylor said OpenAI will continue to run as a charity.
“OpenAI was founded as a nonprofit, and is today overseen and controlled by that nonprofit. Going forward, it will continue to be overseen and controlled by that nonprofit,” Taylor stated.
Speaking to reporters in a video call, Taylor added that OpenAI will turn its for-profit unit into a public-benefit corporation. The charity will control the OpenAI public-benefit corporation by becoming its largest shareholder.
“With the structure we’re contemplating, the not-for-profit will remain in control of OpenAI. We will be converting the limited liability company, that is a subsidiary of that nonprofit, to a public benefit corporation. By doing so, it will change the equity structure of that company so that employees, investors and the not-for-profit can own equity in that PBC,” he said.
In a communication sent to staff, Sam Altman explained the reason behind OpenAI’s decision to maintain nonprofit control.
“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,” Altman said.
OpenAI has already engaged external financial advisors to advise on its recapitalization. Although the nonprofit is expected to hold a majority control, its actual stake in the company remains unclear. According to Altman, both the public-benefit corporation and the nonprofit will pursue the same mission.
Great Move
The decision by OpenAI to abandon its for-profit restructuring plans was received positively by experts. UCLA Lowell Milken Center on Philanthropy and Nonprofits executive Rose Chan Loui termed it a great move.
“We would hope that the nonprofit, regardless of the size of its equity stake, will truly be in control of how artificial intelligence is developed by OpenAI. That this original purpose, and not profit, is paramount,” Loui said.
Founded in 2015 as a nonprofit, OpenAI’s mission was to advance humanity rather than pursue profits. The entity experienced complications in 2019 after Altman and his team formed a for-profit subsidiary to raise venture capital.
Last month, ex-OpenAI staff, civil society representatives, law professors, and Nobel Laureates wrote to attorneys general in Delaware and California asking them to halt restructuring efforts in the AI startup.
Currently, OpenAI is caught up in a legal battle with xAI founder, Elon Musk over its pursuit of for-profit status. Musk is among the co-founders of the nonprofit research firm and has been opposed to OpenAI’s conversion efforts.
Responding to a question about the legal dispute, Altman said, “We are obsessed with our mission and what it takes to fulfill that. You all are obsessed with Elon, that’s your job — like, more power to you. But we are here to think about our mission and figure out how to enable that. And that mission has not changed.”
Major Roadblocks
OpenAI’s quest to become a for-profit entity faced two major roadblocks. First was that as a nonprofit, it was expected to receive fair market value for selling its assets. In a March funding round, the AI startup was valued at $300 billion. Unfair compensation to the charity could have exposed it to legal challenges in Delaware where it is registered.
The Musk vs Altman feud posed the second threat. In a lawsuit that is set for trial, Musk argues that converting OpenAI into a profitable entity breaches its purpose. He further states that his $45 million to the startup was on condition that OpenAI maintains a nonprofit status.
OpenAI has launched various commercial products in recent years. ChatGPT and its AI-powered image generator are among the most notable ones.
