Profits and nonprofits: the odd evolution of OpenAI

Millions interact daily with ChatGPT, OpenAI’s flagship product. Instinctually, many would assume that OpenAI is a for-profit tech firm such as Apple or Microsoft. However, OpenAI has been a tax-exempt 501(c)(3) organization since 2016. After multiple attempts at balancing their non-profit goals with the need for profit-minded investors, OpenAI has adopted a new model of corporate governance, while considerably increasing its grantmaking activities.

History

OpenAI Inc formed in 2015, gaining its tax-exempt status a year later. The nonprofit was established with the intention of ensuring that artificial general intelligence (AGI) would benefit “all of humanity.”  While operating as a nonprofit worked in OpenAI’s infancy, the goal of achieving AGI required more capital. A for-profit arm seemed necessary to attract investors, thus in 2019, OpenAI Limited Partnership (LP) was formed.

OpenAI LP was described by OpenAI as a “capped-profit” company wherein investors and employees would see returns up to a certain capped amount, and any profits beyond that would be funneled back into the 501(c)(3). Additionally, only a minority of board members had financial stakes, and they were barred from voting on financial concerns that could undermine the nonprofit’s mission. This structure was an attempt at cementing OpenAI Inc’s control over for-profit interests.

The original profit cap was set at 100x, meaning that for every dollar invested, profit was limited to $100. However, this profit cap was, in some cases, reduced multiple times to “single digits” by 2021.

A confusing structure

According to 2020 tax filings, three LLCs were listed in the “Related Organizations and Unrelated Partnerships” section: OpenAI GP, OpenAI LP, and OpenAI, LLC. The filings show a control chain in which OpenAI GP directly controlled OpenAI LP, and OpenAI LP in turn directly controlled OpenAI, LLC. In 2022, another LLC called Aestas LP appears, which was also under control of OpenAI GP. By 2024, two additional LLCs appear under the control of OpenAI GP: OpenAI Holdings and OpenAI Global LLC & Disregarded Holdings. 2024 filings also show a newly listed OAI Corporation controlled by OpenAI Holdings, and seven internationally focused entities controlled by OpenAI, LLC.

The OpenAI files, a joint research endeavor of the Midas Project and the Tech Oversight Project, created a flow-chart to explain the structure of OpenAI at this time. The chart is described as an approximation according to “limited public sources and educated assumptions.” The Midas Project and the Tech Oversight Project are both tech watchdog organizations, with the former being specifically focused on “leading AI companies,” while the latter is focused on the tech sector as a whole. The Tech Oversight Project has ties to the Omidyar Network, a left-of-center philanthropic network of eBay Founder, Pierre Omidyar.

Restructuring

On October 28, 2025, OpenAI announced it was changing its structure. OpenAI Inc became the OpenAI Foundation, and the for-profit entities were reformed into a public benefit corporation (PBC) named OpenAI Group. The OpenAI Foundation maintains control over OpenAI Group, holding the power to appoint and remove board members and ensure the public benefit corporation stays aligned with the foundation’s mission. OpenAI Foundation has a 26 percent financial stake in OpenAI Group, with Microsoft holding 27 percent, and the remaining 47 percent being distributed across other investors, including current and former employees.

The advantages of OpenAI switching to a public benefit corporation stem from the legal requirements of a PBC. Unlike a traditional corporation, a PBC is permitted to balance profits for shareholders with the best interests of those affected by its actions, including employees, customers, and communities. A PBC must pursue the public-focused mission outlined in its certificate of incorporation. A traditional corporation could in theory do all these things, however it is not legally obligated to do so.

While this structure is unique, other companies have made use of nonprofit and PBC frameworks. Anthropic, another leading player in the artificial intelligence space, is also a public benefit corporation. The Mozilla Foundation operates comparably to OpenAI, as the foundation wholly owns the Mozilla Corporation, its for-profit entity. Similarly, Patagonia was classified in 2011 as a B certified corporation, a distinction granted to companies that embrace environmental, social, and governance (ESG) advocacy as part of their core mission. Unlike a public benefit corporation, B Corp certification is not legally binding. It is granted by the nonprofit group B Lab.

OpenAI’s grantmaking

Given its name, one might assume that OpenAI became a 501(c)(3) private foundation after the restructuring, but it remains a public charity. Unlike private foundations, which primarily engage in grantmaking, public charities are not required to do so, although OpenAI has engaged in grantmaking since its inception.

Before the restructuring, OpenAI’s grants mostly went to universities, other AI related groups, or the occasional grant to groups such as Recidiviz ($50,000 in 2024), or Operation Hope ($750,000 between 2023 and 2024). However, 2020 stood out as a year where all of OpenAI’s grantmaking supported left-of-center groups, including $42,945 to the ACLU Foundation, $11,715 to the Southern Poverty Law Center, and $45,556 to the Tides Foundation.

OpenAI’s largest grant in 2020 went to UBI Charitable, a California-based nonprofit focused on advocating for a universal basic income (UBI). The group’s president is Chris Clark, the vice mayor of Mountainview California and an advisor to OpenAI. At the time of this grant, Altman was a proponent of UBI, as he believed it could aid in reducing economic impacts of potential unemployment due to AGI.

Since the restructuring, the OpenAI Foundation has significantly expanded its grantmaking operations. In early December 2025, the foundation announced that it would be awarding $40.5 million in grants across 208 nonprofits in the United States through its “People First AI Fund.” The recipients were primarily local nonprofits, ranging from identity advocacy, legal advocacy, community organizing, to media outlets. OpenAI did not disclose any grant amounts in its press release.

Of the 2025 grantees, the following have existing profiles on InfluenceWatch:

• African American Community Service Agency (AACSA)
• Center for Common Ground
• Dolores Huerta Foundation
• News Literacy Project (NLP)
• Public Health Advocates (PHA)
• Veterans for All Voters

Final thoughts

OpenAI has employed a series of unique structures to address the issue of balancing its philanthropic vision of the future with the need for capital to achieve it. Its recent restructuring highlights an attempt to simplify its previously convoluted structure while the increase in grantmaking gives it potential to be a significant player in tech-related philanthropy.

But OpenAI is still self-governed and mostly opaque in its operation, while ChatGPT and its other products have become increasingly ubiquitous. Will OpenAI stick to its core mission of universal human benefit?

Source: https://capitalresearch.org/article/profits-and-nonprofits-the-odd-evolution-of-openai/