First of all, you guys need a contract between yourselves, I would bet that one does not exist, if it does then you're on the right track. Something that spells out the equity share and the responsibilities of each participant as well as other details as to what would happen to assets if the partnership is dissolved as well as what you will do with the money your start up should generate.
Then, yes you should create a company, you could go Inc, or LLC, but you should have something that spells out who the owners are. This will protect you and your personal assets. I'm not sure where you are located but here in the state of Virginia its $125 to start a LLC which requires very little paperwork and you can do it yourself. If you want to actually incorporate with an Inc. then that will require a S or C corporation which are generally more expensive and might require the assistance of an attorney plus the meeting minutes need to be filed once a year I think for a meeting with the share holders.
If it were me I would just create a LLC, but, you need to have something in writing with your partner first before you create this new entity.
Best to ya,
Tim - VA