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OpenAI could transform into a for-profit company, but the process is complex, while Elon Musk has harshly criticized the move, raising doubts about its legality. However, legal experts argue that it is feasible, albeit complicated.
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Elon Musk criticizes OpenAI’s plan to become a for-profit company
In recent days, a controversy is shaking the tech world. OpenAI, the creator of ChatGPT, is considering a radical transformation: from a non-profit organization to a for-profit company.
This possibility, reported by Reuters on September 25, has attracted the attention of many prominent figures in the sector. In particular, that of Elon Musk, entrepreneur and co-founder of OpenAI, who has openly criticized the plan, calling it illegal. But is it really so?
On September 26, Musk used the platform X (formerly known as Twitter) to argue that “you can’t simply convert a non-profit organization into a for-profit organization”.
Musk has defined the move as “illegal,” fueling a heated debate on the actual feasibility of such a transition. However, the reality might be more nuanced than suggested by the tech magnate.
According to several legal experts, California law allows the conversion of a non-profit corporation into a for-profit corporation, although a direct transition to a limited liability company (LLC) is not permitted.
The entire process requires the modification or reformulation of the company’s statutes, a legal step complex but possible.
Once a non-profit company transforms into a joint-stock company, it can then follow the procedures provided by law for further restructurings, such as conversion into an LLC.
Jeremy Hogan, lawyer and prominent figure in the legal sector, has confirmed that, although the process is complicated, it is not prohibited by law.
“It is possible, but it represents a real bureaucratic challenge,” commented Hogan in response to the doubts raised by Musk.
Even ChatGPT, the chatbot developed by OpenAI, gave a similar response, explaining that the transformation from no-profit to for-profit requires a series of legal requirements, including tax implications and formal approvals.
The vision of OpenAI
OpenAI was founded in 2015 in San Francisco as a non-profit organization, with the goal of developing advanced artificial intelligence (AI) for the “benefit of humanity”.
Among its founders are prominent figures such as Sam Altman, Elon Musk, Ilya Sutskever, and Greg Brockman. However, in recent years, the organization has considered the idea of becoming a for-profit company to accelerate its technological developments.
According to sources, the potential restructuring is not yet official, but OpenAI is seriously considering the possibility of transforming into a “public benefit corporation” (PBC).
That is, a for-profit company that, while having commercial objectives, maintains a mission of social impact.
The company already has a for-profit division where most of its employees work, while the board of directors remains under the control of the non-profit part.
This configuration could facilitate the transition towards a more established for-profit structure.
In a statement released to Reuters on September 26, OpenAI confirmed that its mission to develop artificial intelligence for the benefit of all remains intact and that the non-profit organization will continue to exist.
However, he added that they are working with their board of directors to determine the best strategy for the future.
The role of Elon Musk
Elon Musk, who co-founded OpenAI, has long expressed his discontent with the direction taken by the organization.
In 2024, Musk filed a lawsuit against OpenAI and its CEO Sam Altman, accusing them of betraying the original mission of developing artificial intelligence for the good of humanity and not for profit.
Although Musk withdrew the lawsuit in June, he reignited his criticisms in August 2024, once again accusing OpenAI of violating its initial principles.
According to David Lesperance, founder of Lesperance and Associates, Musk sees OpenAI as a potential competitor.
Lesperance observed that Musk’s claims about the legality of the transition from no-profit to for-profit should be taken “with a good dose of skepticism”.
OpenAI, according to him, has probably already obtained strong legal opinions to support its restructuring.
In any case, if OpenAI decided to proceed with the transition, this could pave the way for an initial public offering (IPO) in the future.
Currently, the company’s valuation could reach 150 billion dollars after the restructuring, according to Reuters.
Sam Altman, the CEO di OpenAI, would receive for the first time a package of shares of the new for-profit entity, a further signal that the transition could be imminent.
Despite the concerns of Musk and other critics, many analysts believe that the transformation of OpenAI into a for-profit company may be inevitable.
Especially considering the rapid growth of the artificial intelligence industry and the need for increasingly substantial funding to keep up with the pace of innovation.
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