I am starting a business with my best friend. Do we need a formal agreement ?

If you’re planning on sharing responsibilities, profits and losses, resources and liabilities, then you should make a formal agreement. When everything is going right and you are making money you have a lot of best friends. When things are going great, you do not want one person saying they deserve more than the other. When, and if, your business is losing money, you will want a formal agreement. It is really in everyone's best interest to have a formal agreement when a business venture is involved. You may want to consider a partnership or corporation. Speak to your local CPA about the formation of the business entity.