Mario and Grace decided to start an amusement arcade.They each contribute $5,000 for expenses and they rented a location and purchased five Virtual Reality Helmets (interactive technology games).The arcade has been open only for one month but is already a huge success.They have now hired a manager who would like to invest some money, and they are looking at renting the premises next door in order to expand their operation.

Four days ago, a customer attempting to fight off his 3-D attackers lashed out with his hand and struck the person waiting next in line, knocking out one of that individual's teeth.Yesterday a young woman became so engrossed and agitated by the activity that she fainted, striking her head on the floor.

A friend told Mario that the arcade should incorporate in order to get more investment capital and to protect Mario and Grace from any lawsuits.Grace believes they should set up a partnership instead.

1. What issues should they consider in deciding which form of business would be appropriate for their operation, considering both benefits and liabilities (advantages and disadvantages)?Which method of operation would you recommend?Please ensure you do not list advantages and disadvantages, they must be relevant and apply to the facts of the scenario
2. What is the nature of the business operation that they are currently running?