OpenAI has announced a major reversal of its planned corporate restructuring, opting to maintain nonprofit control over its operations despite earlier proposals to shift to a more traditional for-profit corporate model.
The artificial intelligence firm, which rose to global prominence following the release of ChatGPT, said on Monday that it will retain its existing governance framework with the nonprofit entity holding ultimate authority over its operations.
The decision follows sustained pressure from former employees, legal experts, and major stakeholders, including Tesla and SpaceX CEO Elon Musk.
“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,” said Bret Taylor, Chairman of the OpenAI Board, in a statement. “We thank both offices and we look forward to continuing these important conversations.”
The decision marks a significant departure from a December 2023 plan in which OpenAI said it was considering converting its for-profit arm into a public benefit corporation. Under that arrangement, the nonprofit would no longer have controlling rights, although it would retain share ownership. The restructuring was seen as a pathway to streamline investor participation and improve fundraising capacity.
OpenAI CEO Sam Altman said during a media call that the revised governance structure will still support the company’s capital-raising efforts and allow it to pursue ambitious AI projects while preserving its original mission.
“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 stated. “I won’t pretend that it wouldn’t maybe be easier if we were a fully normal company, but the mission comes first.”
OpenAI’s restructuring efforts are closely linked to a massive funding round backed by Japan’s SoftBank Group Corp. The startup is reportedly targeting a total raise of $40 billion, with SoftBank contributing $30 billion. Under the terms of the deal, failure to complete the restructuring by year-end would give SoftBank the option to cut its commitment to $20 billion. However, Altman confirmed that the latest structure satisfies investor requirements, and funding remains on track.
In a move designed to attract future investors, OpenAI also disclosed that it will eliminate the cap on financial returns for backers of its for-profit subsidiary. Previously, investor returns were subject to a maximum limit to reflect the company’s nonprofit mission. The removal of the cap signals a more flexible approach to private capital, even as nonprofit oversight is maintained.
Founded in 2015 as a nonprofit organization dedicated to the safe and ethical advancement of artificial intelligence, OpenAI introduced a for-profit subsidiary in 2019 to meet the escalating capital needs of large-scale AI research. According to industry analysts, cutting-edge AI development now requires multi-billion-dollar investments in infrastructure, data processing, and model training.
While the company expects to generate $12.7 billion in revenue in 2025, expenditures remain high. Maintaining access to significant investor funding remains critical.
The shift in direction comes amid a high-profile legal dispute with Elon Musk, who co-founded OpenAI but left the board in 2018. Musk recently filed a lawsuit alleging that OpenAI’s proposed corporate structure contradicted its original nonprofit charter. A judge dismissed Musk’s motion to block the restructuring, but parts of the lawsuit are still active.
Former employees and leading AI researchers had also expressed concern about the potential erosion of safety priorities under a fully for-profit model. Nobel laureate and AI pioneer Geoffrey Hinton and former OpenAI engineer Todor Markov were among those who opposed the December proposal.
“OpenAI’s commitment to nonprofit control is a win for responsible AI development,” said Markov, now with rival AI firm Anthropic. “We need strong guardrails, not just good intentions.”
Legal experts say the nonprofit’s continued oversight will likely ease regulatory scrutiny, particularly from state attorneys general monitoring the shift’s impact on public benefit obligations.
“The scrutiny is going to be, ‘Is this corporation really serving the public benefit?’” said Daren Shaver, a partner at Hanson Bridgett LLP. “The opposite side of the coin is going to be, ‘Is it serving too much of a private benefit?’”
Despite the governance pivot, OpenAI has affirmed its commitment to scaling responsibly while pursuing innovation. The firm is investing heavily in model refinement, safety research, and expanded commercial deployment.
As investor capital flows into artificial intelligence startups globally, OpenAI’s hybrid approach of nonprofit governance with for-profit scalability may serve as a precedent for balancing mission-driven innovation with market demands.
