OpenAI’s complex path to becoming a for-profit company
Subscribe to enjoy similar stories. OpenAI’s plan to convert to a for-profit company is meant to simplify the world’s leading artificial-intelligence startup. Making that happen will be enormously complex.
The ChatGPT maker is in the midst of raising $6.5 billion from backers including Microsoft and Nvidia, along with venture-capital firms and a United Arab Emirates state-backed company. An essential provision of talks is that OpenAI, currently governed by a charitable nonprofit, must within two years become a public-benefit corporation. That means its mission is to earn a profit while creating social good.
If it doesn’t, investors could take back their money. To get there, it will have to deal with regulatory requirements in at least two states, determine how to award equity in the for-profit company, and split assets with the nonprofit entity, which will continue to exist. “This kind of transaction is incredibly complex and would involve a large number of legal and regulatory hurdles that would need to be navigated," said Karen Blackistone, general counsel at the investment firm Hangar Management and an attorney specializing in technology and tax-exempt organizations.
An OpenAI spokeswoman declined to comment. The Wall Street Journal’s owner, News Corp, has a content-licensing partnership with OpenAI. OpenAI was founded in 2015 as a nonprofit with the goal of safely developing artificial intelligence.
It created a for-profit subsidiary four years later to help it raise more money. The nonprofit’s board of directors currently controls the subsidiary and has the right to act against shareholder interests for reasons that further its humanitarian mission. In tax filings, OpenAI notes that each of its various arms is
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