There's so many second and third order consequences from a legal precedent for that it boggles the mind, and I'd hope that any judge that understood that should dismiss this lawsuit with prejudice. My fear is that it goes the other way and an injunction is successfully put in place against Yuzu.
Of course it's to establish precedent. They can't file a case against "Yuzu and any future Switch emulators that don't exist yet". But that doesn't mean that it means nothing in itself. A victory against an emulator would be somewhat of a deterrent and would likely reduce piracy somewhat, at least for a little while.
Like, if I write a piece of software that does something innocuous, such as indexing files or something, then I probably wouldn't bother getting any kind of LLC, but I'm very unlikely to get sued over that. Nintendo, however, is famously litigious, has made their stance on emulation very clear, and has no problem going after individuals who dare to defy them. I think doing all the development through an LLC can limit Nintendo going after the individuals.
Nintendo can’t be completely incompetent here; if they get Yuzu shut down someone will inevitably fork it, and they have to know this.
Presumably this is a play to try and establish precedent. They know that this lawsuit means nothing in itself, even if they win, but it can then be used to go after Retroarch or Higan or Mupen64 or Dolphin. This is bad.