by 
The Curious Bag
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Nonprofit status for an organization, from an individual artist to a large museum, has several benefits, all dealing with money in some way. Being a legal nonprofit is often the only way an organization can survive in its pursuits.
Grants
The legal site Nolo.com notes the primary reason for nonprofit status is to be eligible for grants. It also allows donors to take a tax credits on their donations to your organization.
Tax Exempt
Despite charitable intentions, if your organization collects money but doesn't file for nonprofit status, the Internal Revenue Service (IRS) could consider that money as profit, and you would end up with a tax bill.
Liability protection
Directors, officers and members of a nonprofit are protected from liability for claims against the organization. The organization itself can still be sued, but only the organization's assets are at risk.
Who's Eligible?
The activities of an individual or group that can be considered for nonprofit status are wide ranging. Generally, if your activity is charitable, literary, educational, scientific or religious, you should be eligible for a tax exemption.
Nonprofit Corporations
Forming a nonprofit corporation is much like forming a for-profit corporation. But besides filing articles of corporation, you must apply for nonprofit status on the state and federal level.
Source:
More Information:
Internal Revenue Service: Tax Information for Charities & Other Non-Profits
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