Investing.com -- OpenAI is contemplating a shift in the company’s structure to form a conventional profit-making corporation alongside a nonprofit division.
The board is currently reviewing a plan to transform OpenAI’s business into a public benefit corporation - a structure that can generate income while aiming to improve society - while maintaining a nonprofit division. This was revealed in a blog post published on Friday. As part of the proposed structure, the nonprofit arm would possess shares in the profit-making entity.
The company has reportedly been in discussions with regulators in California and Delaware regarding the potential change. The recent announcement indicates that the board is ready to proceed with the restructuring.
OpenAI’s present profit-making division is controlled by its nonprofit organization. According to the proposed plan, the business would become a Delaware Public Benefit Corp., or PBC. The nonprofit entity would continue to exist as one of the most well-funded nonprofits in history and would hold a significant interest in the profit-making arm, represented by shares determined by independent financial advisers at a fair valuation, as stated by OpenAI’s board.
A simplified profit-making structure is seen as more appealing to investors, although it could lead to questions about whether the San Francisco-based company is staying true to its original public mission. Elon Musk, a co-founder and early investor in OpenAI, filed a lawsuit against the company in August, alleging that it violated an agreement to operate as a nonprofit. Musk recently requested a federal court to prevent OpenAI from transitioning to a profit-making business while his legal battle is ongoing.
OpenAI’s board stated that the proposed plan would ensure the long-term success of the company’s profit-making arm. It would assist the nonprofit in raising funds and more effectively executing its mission, according to the post. The board further stated that the plan under consideration would better enable OpenAI’s nonprofit to pursue charitable initiatives in areas such as health care, education, and science.
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