The partners should consider forming a corporation. The key advantage here, based on the increased number of suits against swimming pools, is the limited personal liability of the partners. That means that if the partners happened to be sued, they would not be held liable (as long as there was no evidence of fraud.) Corporations enjoy rights to the court, due process, free speech, and freedom from unreasonable searches and seizures. Corporations last indefinitely, unlike partnerships.
There are some cons to corporations, including double taxation. The corporation's profits are taxed and then once dividends are distributed to shareholders, their profits are also taxed.
Since the partners want to expand and grow their business as well as be protected from liability, incorporating would be a good move.
Torts and Criminal Acts:
In the case of Persson v. Smart Inventions, Inc. , 125 Cal.App.4th 1141, 23 Cal.Rptr.3d 335 (2 Dist. 2005) the court awarded damages, fees, and costs to Persson. The state intermediate appellate court affirmed.
The Court stated Smart Inventions is liable under the doctrine of respondeat superior for torts of its agents or employees committed while they are acting within the scope of their employment.
The Court further stated that Nokes acted on behalf of Smart Inventions when he signed the agreement on behalf of Smart Inventions. The fact that he concealed information relevant to the agreement as an agent of the company within the scope of his employment created the liability.
Torts and Criminal Acts:
In the case of Greg Allen Construction Co. v. Estelle, 798 N.E.2d 171 (Ind. 2004) the trial court granted breach of contract damages against the corporation, but not against the corporation's president, who did most of the work.
The Court of Appeals held that the corporation's president was individually liable for the negligent work. The Supreme Court affirmed the trial court's judgment regarding Allen's personal liability.
The court stated that Allen's duty to perform the contract. The negligence Allen committed was in the course of his duties as an employee of the corporation. Under the traditional respondeat superior doctrine, if Allen is liable in negligence to the Estelles, then so is his principal, the corporation.
Under the contract, only the principal has agreed to perform the obligations of the contract. To impose the same liability on the agent would create a covenant not in the contract. The parties had arranged to put the principal, and only the principal, on the line.
Therefore, only the principal or the corporation is liable for damages due to negligence.