How should a third person join a jama'ath of two?

When two people want to pray in jama’ah and there is no third person available, the Imaam (leader) stands on the left and the muqtadi (follower) stands on the right, a few inches behind the Imaam and they start. If a third person arrives after they begin their salaah, what should he do to join the congregation? Where should he place himself?