It sounds to me like you have a lot to think about in regards to the business.
1. Always avoid others having ownership in your business. Your money = your business unless they are providing VERY substantial services. Although it sounds to be as though they basically just stock the shelves. (sounds kind of like the Coca-cola guy who fills the machines). Hire the business partner as a commissioned employee or as an outside commissioned sales person.
2. NEVER pay cash. You can get yourself into serious trouble this way. I’d go the 1099 route since they have incentives to acquire accounts and will incur mileage.
Although if you are providing the transportation from location to location then you may want to consider them an employee.
3. If they are a partner this will depend upon the entity; however, a partner never receives a 1099. They will receive a w-2 if it is a C or S corp(also issue them a k-1). If it is a partnership they will receive only a k-1.
4. See above.
5. I suggest having your accountant take care of everything.
6. The business will be whatever you want it to be. Get your attorney and accountant together to figure everything out.
Exit strategy, sell it off to someone or sell it to one of your salesmen.
-Steven the Tax Guy
Your guide to IRS laws, rules and regulations.