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?
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...