The penalty for Option 3 was not purely a punishment. It merely meant that if Xiao Ran chose the first option while not having a legion, he would have to bear the corresponding consequences himself.
If Xiao Ran chose to join a legion, then he would still retain primary ownership of the Exclusive Faction known as the 25th Fleet. He would receive that legion's protection and rewards, and the legion would expend resources to make Xiao Ran stronger and better able to protect himself. However, part of the gains from the 25th Fleet Exclusive Faction would also have to be handed over to the legion he joined, essentially like giving up a portion of the shares.
But joining a legion and surrendering some benefits did not mean Xiao Ran's income would decrease. A large legion had many members, and every Merit Point spent by each member within the fleet would leave a portion in Xiao Ran's hands. If there were ten thousand members and each spent a hundred Merit Points within the fleet, that would mean an income of one million. After costs and distribution, quite a lot would still end up in Xiao Ran's hands each mission cycle.
If Xiao Ran developed a legion himself, he definitely would not receive such returns in the early stages. Nor would there be much chance of rapidly developing the faction. Yet it would ensure all rights and interests of the Exclusive Faction, and he could only earn Merit Points through other means.
In short, joining a legion would allow rapid development and rapid growth in strength. It would not just be Xiao Ran who received attention; his followers would also receive special treatment. After all, every one of Xiao Ran's followers possessed special abilities. Mwu was a Lucky Captain, Cruze was a