In a way, organizations are a Load Bearing Fiction that we create to personify a project. Perhaps a more accurate word would be ‘entity-ify’ but Human brains put all entities in the same bucket. While on paper this personification is primarily legal, its more important effect is to give the project a life of its own. Instead of being “Elon’s rocket project” it becomes “SpaceX.” Now you can say “SpaceX did this! SpaceX did that. I like/dislike SpaceX.” My (unsubstantiated) hunch is that personifying a project takes advantage of the brain’s chunking mechanism and copious machinery devoted to interpersonal interactions.^1
Creating an organization around a project crystalizes it in a way. People start trying to pin a ‘consistent personality’ on the organization and holding it accountable for its actions. These expectations put pressure on you to do what people expect, instead of what needs to be done for the project. In people’s minds organizations are default alive regardless of the reality (remember - personification). This perception in turn puts pressure on you to continue a project beyond the point where you would let go naturally.
As soon as you create an official organization, it becomes tempting to play games other than the ones that are best for the project. Brand/prestige, fundraising, hiring, marketing, advisors are all games that organizations need to play eventually but may not be helpful for a project.
Of course, these downsides can actually become helpful at some point in a project’s trajectory. Additionally, organizational structures provide plenty of other upsides like accountability and legitimacy. The upshot isn’t that you shouldn’t create organizations around projects. Instead you should think very seriously about what would be best for the project (instead of your ego) before you do.