Good Question! I have seen this situation on more than one occasion. The thing to understand here is that there is more than one type of equity and you two need to come to an agreement as to how these types of equity will be valued in your partnership. The first type is what you are bringing to the table CASH. This one is simple and easy to understand. Cash will be the fuel and life blood of the business. Without it there is no business. Your partner is bringing two kinds of equity; SWEAT equity and CUSTOMER equity. Remember that know-how and a client base are very valuable, and the business cannot grow (i.e. make more CASH) if you don't have know-how and customers. When partners do not come to an agreement up front as to how much they value each others contributions, disaster is always on the horizon. The best way to do this is to set up an legal operating agreement (formalizing the arrangement) and a business plan (which sets the both of you on the same page). I could start this process for you easily on a call. Best of luck.