If they never feel the need to incorporate, then this framework doesn't stop them from getting as big as they can. But if the money they're making is enough to

If they never feel the need to incorporate, then this framework doesn't stop them from getting as big as they can. But if the money they're making is enough to live on well, they're going to find themselves under more and more pressure to incorporate. The (obviously untested) assumption is that fear of operating a real business with unlimited liability will keep most people away from it, while many of the fools who do rush in will end up getting culled by their own recklessness.