Exactly. A company with only 1 person has to spend a large share of its time-resources just complying with taxes and regulations. The more people in the company, the lower the proportion of those time-resources are needed. With a large company, it's easy to employ someone (or a team even) to do that work full-time, but for a tiny company it's impossible; they wouldn't get any actual work done to keep the company running. This would have the effect of killing small business, which would provide a huge inertia advantage to large businesses (which started small, when they didn't have so many regulations).