OpenAI has executed a significant reversal on its corporate structure, announcing today that its founding nonprofit entity will maintain ultimate oversight and control over the company’s activities. This decision abandons a previously detailed plan to grant more independence to its commercial division.
While the for-profit arm, established as an LLC in 2019, will proceed with converting into a Public Benefit Corporation (PBC), it will now operate explicitly as a subsidiary governed by the original nonprofit, which also becomes a substantial shareholder. The company confirmed this change follows engagement with state Attorneys General and considerable external criticism regarding OpenAI’s commitment to its mission amid rapid commercialization.
Board Chair Bret Taylor outlined the structure in an official statement: “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.”
He acknowledged the decision followed “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.”
This nonprofit board retains the ultimate authority, including the power to potentially remove the leadership of the for-profit PBC if its actions diverge from the mission of safe AGI development. Taylor further clarified on a call with reporters that the PBC structure legally “has to consider the interests of both shareholders and the mission.” A PBC is a type of for-profit corporate entity whose charter includes a legally defined social or environmental mission alongside traditional profit motives.
This marks a definitive U-turn from the strategy OpenAI announced in December 2024. That plan involved the nonprofit relinquishing direct control, allowing the PBC to operate independently while the nonprofit focused on separate charitable work. OpenAI’s blog post then explicitly stated: “The PBC will run and control OpenAI’s operations and business…” – a stance now formally rescinded.
A Shift Following Sustained Scrutiny
Today’s announcement comes after months of intense debate and pressure concerning OpenAI’s governance and priorities. A core criticism, amplified after the December plan, was whether a profit-seeking entity could reliably uphold the mission of ensuring artificial general intelligence benefits all humanity, especially given the technology’s potential power and risks. This concern was central to arguments that the previous plan would dilute the nonprofit’s essential oversight role.
Formal opposition intensified in late April when ten former OpenAI employees, supported by AI pioneers Geoffrey Hinton and Stuart Russell, petitioned the California and Delaware AGs to intervene. Their letter argued the proposed restructuring would “eliminate essential safeguards, effectively handing control of…what could be the most powerful technology ever created to a for-profit entity with legal duties to prioritize shareholder returns.”
Former engineer Nisan Stiennon was quoted stating, “It is to OpenAI’s credit that it’s controlled by a nonprofit with a duty to humanity. This duty precludes giving up that control.”
Hinton had previously backed a legal brief from nonprofit Encode opposing the plan, stating, “Allowing it to tear all of that up when it becomes inconvenient sends a very bad message to other actors in the ecosystem.” Encode’s brief had argued, “Control over the development and deployment of AGI is a charitable asset that should not be sold for any price.”
These petitions landed while AG offices were reportedly already examining the situation. This external pushback compounded the ongoing legal battle with co-founder Elon Musk, who sued OpenAI alleging it betrayed its founding mission for the benefit of investor Microsoft. Although Musk’s attempt to get a preliminary injunction failed in March, the case continues. OpenAI countersued Musk in April, following the board’s unanimous rejection in February of what Taylor called “Mr. Musk’s latest attempt to disrupt his competition” – a $97.4 billion takeover proposal from a Musk-led group.
Navigating Financial Needs And Safety Concerns
Underlying the structural debate are OpenAI’s significant operational costs and capital requirements. The company reportedly projected a $5 billion loss for 2024 and faces escalating compute expenses. This drove the pursuit of large investments, including a recent SoftBank-involved round valuing the company at $300 billion.
However, accessing the full $40 billion from this funding was reportedly tied to completing the for-profit PBC conversion by the end of 2025 under the previous plan, potentially involving a $20 billion penalty clause for failure, highlighting the intense pressure surrounding the restructuring. Reports in January also suggested difficulties in determining Microsoft’s equity stake under that framework.
The new structure, which Taylor confirmed allows employees, investors, and the nonprofit to own equity in the PBC, may simplify these arrangements, though the nonprofit’s specific stake size was not disclosed.
Concerns about OpenAI’s direction were further amplified by reports in mid-April describing drastically shortened AI safety evaluation times and updates to safety frameworks that critics argued could compromise caution for competitive speed.
Explaining The Path Forward
In his letter accompanying today’s announcement, CEO Sam Altman presented the revised structure as the optimal path. He reaffirmed the goal of “democratic AI” and acknowledged the need for potentially trillions of dollars to achieve broad deployment. “We believe this sets us up to continue to make rapid, safe progress and to put great AI in the hands of everyone,” Altman wrote. He added he was “very happy that the nonprofit and the PBC will have the same mission,” a point he reiterated on the reporter call.
The nonprofit, bolstered by its shareholding in the PBC, will direct resources towards philanthropic initiatives. Guidance for these efforts will come from a nonprofit commission announced in early April, whose members include labor advocate Dolores Huerta and former media executive Monica Lozano. This structural clarification comes as OpenAI is widely expected to announce significant product updates, potentially including a new search offering.
