These terms have different implications for your taxes, corporate governance and business activities.
A nonprofit organization is one that qualifies for tax-exempt status by the IRS because its mission and purpose are to further a social cause and provide a public benefit. Nonprofit organizations include hospitals, universities, national charities and foundations. They file different tax forms from a corporation.
A not-for-profit organization (NFPO) is one that does not earn profit for its owners. All money earned through pursuing business activities or through donations goes right back into running the organization. A good example is a sports club; the purpose of the club is to exist for its members’ enjoyment.
A corporation is created when it is incorporated by a group of shareholders who have ownership of the corporation, represented by their holding of common stock, to pursue a common goal. A corporation's goals can be for-profit or not, as with charities. However, the vast majority of corporations aim to provide a return for its shareholders. Shareholders, as owners of a percentage of the corporation, are only responsible for the payment of their shares to the company's treasury upon issuance. When you are operating as a NONPROFIT, you have to be very careful of the terminology used and be very mindful of how operations are conducted. You must also keep your financials, minutes, by-laws, purpose, federal and state filings up to date to avoid revocation of tax exempt status. In the event of an IRS audit, not keeping financials and employee records together can not only trigger revocation of exempt status, but IRS hearings as well.
Please refer to attachment that charts out differences between the different entities.
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