My thought is that a corporation would not be an entity. It would simply be a partnership of individuals, so the penalties would fall on the individuals. They could have some sort of a contractual arrangement with one another for things like mutual support if someone sues them.

I also suspect that without corporations, businesses would be a lot smaller, limited to whatever the owners can personally monitor and control.

Makes sense. I just thought if a corporation would be taken out of business for a while instead of just paying a fine as they do now, a corporation couldn't grow very big either because the risk of somebody doing something wrong would be too high. Your approach is probably simpler.