When Larry Sanger left Wikipedia, Wales's approach was different from Sanger's. Wales was fairly hands-off. Despite involvement in other projects, Wales has denied intending to reduce his role within Wikipedia, telling The New York Times in 2008 that "Dialing down is not an option for me ... Not to be too dramatic about it, but, 'to create and distribute a free encyclopedia of the highest possible quality to every single person on the planet in their own language,' that's who I am. That's what I am doing. That's my life goal." In May 2010, the BBC reported that Wales had relinquished many of his technical privileges on Wikimedia Commons (a Wikipedia sister project that hosts much of its multimedia content) after criticism by the project's volunteer community over what they saw as Wales's hasty and undemocratic approach to deleting sexually explicit images he believed "appeal solely to prurient interests".
In mid-2003, Wales set up the Wikimedia Foundation (WMF), a non-profit organization founded in St. Petersburg, Florida and later headquartered in San Francisco, California. All intellectual property rights and domain names pertaining to Wikipedia were moved to the new foundation, whose purpose is to support the encyclopedia and its sister projects. Wales has been a member of the Wikimedia Foundation's Board of Trustees since it was formed and was its official chairman from 2003 through 2006. Since 2006 he has been accorded the honorary title of chairman emeritus and holds the board-appointed "community founder's seat" that was installed in 2008. His work for the foundation, including his appearances to promote it at computer and educational conferences, has always been unpaid. Wales has often joked that donating Wikipedia to the foundation was both the "dumbest and the smartest" thing he had done. On one hand, he estimated that Wikipedia was worth US$3 billion; on the other, he weighed his belief that the donation made its success possible.
Wales's association with the foundation has led to controversy. In March 2008, Wales was accused by former Wikimedia Foundation employee Danny Wool of misusing the foundation's funds for recreational purposes. Wool also stated that Wales had his Wikimedia credit card taken away in part because of his spending habits, a statement Wales denied. Then-chairperson of the foundation Florence Devouard and former foundation interim Executive Director Brad Patrick denied any wrongdoing by Wales or the foundation, saying that Wales accounted for every expense and that, for items for which he lacked receipts, he paid out of his own pocket; in private, Devouard upbraided Wales for "constantly trying to rewrite the past".
Later in March 2008, former Novell computer scientist Jeff Merkey said that Wales had edited Merkey's Wikipedia entry to make it more favorable in return for donations to the Wikimedia Foundation, an allegation Wales dismissed as "nonsense". In early 2016, Wikipedia editors perceived the WMF's Knowledge Engine project as a conflict of interest for Wales, whose business Wikia might benefit from having the WMF spend a lot of money on research in respect to search. Wikia attempted to develop a search engine but it was closed in 2009.
Wales had a brief relationship with Canadian conservative columnist Rachel Marsden in 2008 that began after Marsden contacted Wales about her Wikipedia biography. After accusations that Wales's relationship constituted a conflict of interest, Wales stated that there had been a relationship but that it was over and said that it had not influenced any matters on Wikipedia, a statement which was disputed by Marsden.