OpenAI to become for-profit company

throwup238 · a year ago

I’m confused by this news story and the response here. No one seems to understand OpenAI’s corporate structure or non profits at all.

My understanding: OpenAI follows the same model Mozilla does. The nonprofit has owned a for-profit corporation called OpenAI Global, LLC that pays taxes on any revenue that isn’t directly in service of their mission (in a very narrow sense based on judicial precedent) since 2019 [1]. In Mozilla’s case that’s the revenue they make from making Google the default search engine and in OpenAI’s case that’s all their ChatGPT and API revenue. The vast majority (all?) engineers work for the for-profit and always have. The vast majority (all?) revenue goes through the for-profit which pays taxes on that revenue minus the usual business deductions. The only money that goes to the nonprofit tax-free are donations. Everything else is taxed at least once at the for-profit corporation. Almost every nonprofit that raises revenue outside of donations has to be structured more or less this way to pay taxes. They don’t get to just take any taxable revenue stream and declare it tax free.

All OpenAI is doing here is decoupling ownership of the for-profit entity from the nonprofit. They’re allowing the for profit to create more shares and distribute them to entities other than the non-profit. Or am I completely misinformed?

[1] https://en.wikipedia.org/wiki/OpenAI#2019:_Transition_from_n...

throwaway314155 · a year ago

It's about the narrative they tried to create. The spin. It doesn't matter much if they were technically behaving as a for-profit entity previously. What matters is that they wanted the public (and likely, their talent) to _think_ that they weren't even interested in making a profit as this would be a philosophical threat to the notion of any sort of impartial or even hopefully benevolent originator of AGI (a goal which is laid plainly in their mission statement).

As you've realized, this should have been (and was) obvious for a long time. But that doesn't make it any less hypocritical or headline worthy.

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halJordan · a year ago

It isnt a tax thing or a money thing, its a control and governance thing.

The board of the non-profit fired Altman and then Altman (& MS) rebelled, retook control, & gutted the non-profit board. Then, they stacked the new non-profit board with Altman/MS loyalists and now they're discharging the non-profit.

It's entirely about control. The board has a legally enforceable duty to its charter. That charter is the problem Altman is solving.

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burnte · a year ago

The problem is that OpenAI calls itself OpenAI when it's completely sealed off, and calls itself a non-profit when, as you say, almost everything about is for profit. Basically they're whitewashing their image as an organization with noble goals when it's simply yet another profit motivated company. It's fine if that's what they are and want to be, but the lies are bothersome.

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kweingar · a year ago

Can anybody explain how this actually works? What happens to all of the non-profit's assets? They can't just give it away for investors to own.

The non-profit could maybe sell its assets to investors, but then what would it do with the money?

I'm sure OpenAI has an explanation, but I really want to hear more details. In the most simple analysis of "non-profit becomes for-profit", there's really no way to square it other than non-profit assets (generated through donations) just being handed to somebody for private ownership.

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HarHarVeryFunny · a year ago

And more high level exits ... not only Mira Murati, but also Bob McGrew , and Barret Zoph

https://www.businessinsider.com/sam-altman-openai-note-more-...

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addedlovely · a year ago

In that case, where can I apply for my licensing fee for my content they have scraped and trained on.

List of crawlers for those who now want to block: https://platform.openai.com/docs/bots

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zingerlio · a year ago

We are booing Altman because his bait and switch feels unethical, but many of us saw it coming from a mile away, how does he make this transition to take advantage of the financial system so smoothly? Is there no legal guard for such maneuver, or is he just an insanely good player to circumvent all of them in plain view?

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HeralFacker · a year ago

Converting to a for-profit changes the tax status of donations. It also voids plausibility for Fair Use exemptions.

I can see large copyright holders lining up with takedowns demanding they revise their originating datasets since there will now be a clear-cut commercial use without license.

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neilv · a year ago

The incremental transformation from non-profit to for-profit... does anyone have legal standing to sue?

Early hires, who were lured there by the mission?

Donors?

People who were supposed to be served by the non-profit (everyone)?

Some government regulator?

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fourseventy · a year ago

So are they going to give elon equity? He donated millions to the non profit and now they are going to turn around and turn the company into a for-profit based on the work done with that capital.

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