In general it is a bad idea simply because you will encounter every possible type of situation as the life of the business unfolds. You will be tested to the Nth degree as will your business partner. The business will strain the relationship to its limits.
That said, I'm living proof that it can work quite well. I own a business that employs my wife and several friends and have learned the hard way that it's all about management style. Although I'm the boss that makes the final tough decisions, I simply stay out of the way the majority of the time. When a sticky situation arises I help them talk it out and let them arrive at their own solutions. Sometimes it's hard, but I've discovered their solutions are equal or better than what I had in mind.
Many businesses start out with equal partners with no single boss. This is harder still as no clear line of deliniation separates the partners. Here I might suggest each partner evaluate their own strengths and weaknesses. For example, "Joe you're the idea guy and I'm more of a numbers guy". When you reach an impass on a single issue you should allow the person with more expertise in that area to make the final decision.
That's a tough proposition as most issues overlap several areas. If you're deciding whether or not to take the plunge to develop a new product category, for example, it involves both financial and idea planning. Who makes the final decision? Here it is a great help to have a 3rd party, such as a mentor, to bounce ideas off and clear up a cloudy situation.
Ask yourself what you value more, the business or your friendship, realizing that the one you don't chose will fall apart.
If you don't like making this decision now, or don't like the answer you get, then don't mix the two. There will likely come a time when you are asked to make that choice and sometimes you don't have the ability to answer "both".
Firstly, anyone you do business with is not your family member nor your friend. He is your partner. You need to ask yourself which of the two people would help your business more. Essentially, you'll want someone who has different skills than you and has strengths where you have weaknesses.
This by no means is a full answer, you need to make a table for yourself and compare the pros and cons.