Legal Question in Business Law in California

It is not clear what you mean by a "business". Conducting business through some types of entities, generally corporations and limited liability companies, can provide some protection for your other assets and business, but only if the entities are properly set up and managed. Using an entity also entails some additional costs, which you need to be aware. It would be best for you to consult with an attorney regarding the best form of entity to use and the best way to protect you in connection with your specific business.

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Accepting donations is almost inseparable from soliciting donations, and it would be pretty easy to break some law or attorney general policy, especially without becoming a registered tax-exempt organization beforehand. You could certainly consider setting up a non-profit public benefit corporation, then asking the IRS to qualify it as tax exempt. This process is a bit on the complex and time-consuming side, but in the long run may be your better alternative. There is some statutory exemption for liability for directors and officers of public benefit corporations who serve without compensation.

Much easier in the short run is to set up a regular (for profit) corporation, pay the annual franchise tax, and set up some kind of charges that are sufficient to reimburse your costs.

Properly set-up and run corporations and LLCs provide substantial, but not complete, protection from personal liability for their owners, officers, directors and managers. This does not protect the corporation or LLC itself, but generally insulates the management and ownership from the liability. "Piercing the corporate veil" is rather hard to do and doesn't happen frequently.

In addition, you should have liability insurance.

I suggest you buy or borrow a couple of those "Nolo Press" type self-help law or business paperbacks, one covering small corporations, one covering non-profit entities. Read them and then decide. Or obtain assistance from a retained lawyer.