OpenAI May Have Outgrown Its Nonprofit Structure, Facing Costly Reorganization: Expert

As OpenAI's valuation soars to $157 billion, its unique hybrid nonprofit and for-profit structure is facing serious challenges, according to Fortune. Experts believe OpenAI may have reached or exceeded the limits of its corporate structure, which could lead to a costly and complex restructuring.OpenAI currently operates as a nonprofit organization with a mission to develop artificial intelligence for the benefit of “all of humanity” while controlling for-profit subsidiaries. Jill Horwitz, a professor of law at UCLA, emphasizes that when the nonprofit and for-profit sectors conflict, the charitable purpose must take precedence.

If the nonprofit sector loses control of its subsidiaries, OpenAI may be required to pay fair market value for the interests and assets formerly owned by the nonprofit sector. This involves a complex valuation of assets, including intellectual property, patents, commercial products and licenses. Experts anticipate that OpenAI could face intense scrutiny from the IRS and the offices of the Attorneys General of Delaware and California.

OpenAI CEO Sam Altman recently confirmed that the company is considering a restructuring that could transform it into a public benefit corporation, but details have yet to be released.OpenAI Board Chairman Bret Taylor has said that the board is focused on fulfilling its fiduciary responsibilities, and that any potential restructuring would ensure that the nonprofit continues to exist and thrive. However, some observers, including former board member Elon Musk, have expressed skepticism that OpenAI is staying true to its mission.