Well, we are happy working this way. I really like doing the different sides of the code - physics, multiplayer, interface, graphics. Eric enjoys being a texture artist, a track designer, 3D modeller and so on. We like working from home and being able to have a day off in the middle of the week and work a Saturday instead, or in my case, go on a bike ride during working hours and work later in the evening. It's a life we have chosen to lead and it works. It is very different from the capitalist ideal of spending your life trying to make as much money as you possibly can, for no apparent reason. It is possible that Live for Speed doesn't reach the potential it could, but it sure does keep going on and on.
Let's say we decided to give up this way of life, restructure as a company and hire an office. At least one of us would need to sell our house and move nearer to the office, then start working 10am to 6pm, 5 days a week, hire people and spend our working days managing a team. We've been in that situation before, in more than one game company, and decided to do things differently. We have no desire to go back to that. But anyway, if we did (which we won't) then sure we could progress faster and then there would be these major setbacks, like the guy who did the physics leaves the company and no-one knows how the hell his code works, and then you need to find a replacement. The same reason why big commercial games are usually done quickly then they make another one.
Also let's say we somehow created a company for the sake of selling it to a corporation. They would require that we worked on for some years under their control. Again, not what we want at all. We don't want to sell it anyway, we just want to keep working on this thing we enjoy doing and which makes us a living. So that's what we are doing!