Key takeaways 

• OpenAI converted from a nonprofit to a public benefit corporation
• PBCs balance financial returns with a chartered public mission
• Unlike nonprofits, PBCs don’t get special tax breaks and have duties to investors

OpenAI’s conversion to a public benefit corporation (PBC) formalizes a dual focus: investor returns and a defined public benefit. The shift is drawing attention to a structure used by a small number of publicly traded companies and thousands of private firms.

When OpenAI converted to a for-profit company in late October, the headline wasn’t just about artificial intelligence’s rapid growth. The ChatGPT owner switched from a nonprofit to a public benefit corporation, a structure that sets it up to pursue profits and a public purpose.¹

Unlike nonprofits, PBCs have a fiduciary responsibility to provide financial returns to investors. But PBCs also differ from traditional for-profit corporations; they can balance financial interests with a specific public mission defined in their charters.²

While there are several thousand private PBCs in existence, the ranks are rare among publicly traded companies, numbering less than two dozen.^3,4 OpenAI’s high profile puts new attention on the structure and would allow the company to pursue an initial public offering (IPO) — if it chooses that route.⁵

Here’s a closer look at how PBCs operate:

What is a public benefit corporation? 

Traditionally, organizations had to choose between being for-profit or nonprofit — they couldn’t be both. Delaware, where many public companies incorporate, created a PBC charter in 2013 and updated it in 2020, allowing profit-making entities to pursue parallel goals.⁶ It’s one of several states that has such charters in various forms.⁷

Under Delaware law, directors of a PBC must balance shareholder interests, the impact on those affected by the company’s actions, and the public benefits named in its charter. They aren’t required to prioritize one over another — only to act in good faith when weighing them.⁸

PBCs are required to issue periodic reports to shareholders outlining their progress toward the public benefits stated in their charter. But the reports are not audited or certified by a third party.⁹

PBCs don’t get special tax exemptions or incentives, a big difference from nonprofits, which can be exempt from federal income taxes if they meet certain requirements.¹⁰

Read more: Tax 101: Understanding the basics

Why do companies choose to be PBCs? 

A PBC structure gives companies the freedom to pursue financial and non-financial interests. A more traditional for-profit corporation can face legal challenges for prioritizing non-financial interests above shareholder ones.¹¹

In OpenAI’s case, the PBC will be a for-profit subsidiary of the nonprofit OpenAI Foundation, which holds a $130 billion stake (26% ownership) and plans to invest in areas like health research, education, and AI safety.¹²

Microsoft, a top investor in OpenAI since 2019, will have a $135 billion stake (27% equity) in OpenAI and technology rights until 2032. The restructuring took nearly a year to negotiate among several parties and was reviewed by officials in Delaware and California, where the company is incorporated and based, respectively.¹³

Companies may choose to convert to a PBC to stand out from the crowd and attract investors interested in its public goals. PBC status can preserve the public mission through fundraising rounds, changing leadership, and IPOs. Conversely, switching from a PBC to a more standard for-profit company isn’t seen as a cumbersome process if a company wants to opt out.¹⁴

Read more: Understanding IPOs: What is an IPO and its benefits?

What are some other notable PBCs? 

Empower research show that AI is indispensable for some — 28% of Americans, including 29% of Millennials and 27% of Gen Z, can't imagine working without these tools.

The PBC structure has been popular among several AI companies benefiting from that trend, including Anthropic, which has a stated public mission to distribute the technology responsibly and equitably.¹⁵ 

There are roughly 20 publicly traded PBCs. Some notable examples outside the technology sector include egg and butter producer Vital Farms, shoemaker Allbirds, and eyewear company Warby Parker.¹⁶

A handful of healthcare companies also have adopted the public benefit corporation model, including publicly traded Veeva Systems and United Therapeutics.¹⁷

Read more: Private equity vs. public equity: What’s the difference?