Our 501(c)(3) charitable exempt status of our nonprofit corporation was automatically revoked by the Internal Revenue Service. Can I continue to run the organization as a for-profit entity, or convert it to a "sole-proprietor" corporation for-profit?
No. Your 501(c)(3) charitable exemption meant that you didn’t have to pay federal income tax on your surplus revenue. If you want to continue to operate without recovering your exempt status, you can continue to operate, but you will have to operate for the charitable purposes set out in your articles of incorporation and pay federal tax on your net income. You will still be a nonprofit corporation under state law, but will be taxable at the federal level. (See Ready Reference Page: “What Do We Mean When We Say ‘Nonprofit’?”) You will be unusual, but not unique. You could seek to make a profit and pay the income tax, but one of the requirements of a nonprofit corporation under state law is that it cannot be operated for individual private inurement or private benefit. It can’t pay dividends to owners.
Also, you can’t convert the corporation into a for-profit corporation. To qualify for your (c)(3) status, you had to agree in your articles of incorporation (or it was a requirement of your state law) to use the net remaining assets for charitable purposes if you ever dissolved the corporation. The remaining assets have to be used for charitable purposes; they can’t be used to make individuals rich. Both the IRS and your state Attorney General would have a basis to prevent you from operating as a for-profit and paying dividends to yourself or others who also become shareholders. You could buy the assets from the nonprofit and continue the operations in a for-profit entity, but you would have to pay fair market value for the business and someone would have to use the sales proceeds for charitable purposes.