It is a state created corporate entity. Nonprofit vs. not-for-profit (vs. non-profit) There is no real difference in meaning between nonprofit and not-for-profit. Both can be used to describe organizations that do not redistribute surplus funds to owners or shareholders.A nonprofit corporation is a corporation formed to carry out a charitable, educational, religious, literary, or scientific purpose. A nonprofit corporation doesn't pay federal or state income taxes on profits it makes from activities in which it engages to carry out its objectives. A 501(c)(3) organization or 501c3 organization, also colloquially known as a 501c3, is a United States nonprofit organization that has been approved by the Internal Revenue Service to be tax-exempt under the terms of section 501(c)(3) of the Internal Revenue Code. It has its own birth certificate ( an Nonprofit Corporation certificate ) and its own Social Security Number ( a Federal Tax ID EIN ). Thus, it is a separate person. A legal person as opposed to a natural person because it has papers but no physical body.

If you file as a sole proprietor, you will be liable for all business debts and liabilities. For example, you have a cleaning business and your employee steals from your clients, you will be liable personally. If you form a Corporation, and the same thing happens, your personal assets, such as your home and car are protected. If sued, they can only get what the Corporation has. If only $1,000 in the bank, that is all the plaintiff gets.

Even though they will tell you that Delaware or Nevada is the best state, the best state is actually the state you do business in. This simplifies the entire business.