a) personal-- not being an asshole.
-- if you know its going to be an issue, its going to be a bigger one later. do what is fair and right as soon as possible. if you need to go your own ways, thats what you need to do, there is always a new twist on an old idea waiting to be developed. having been through this on the other side, i started a company a while ago, sensed things were not right and then after i spent an additional 100k on salaries and training, the guys left with jobs at another company and i was left with nothing. as an entrepreneur you have to learn to trust your gut it will allow you to make the first move advantage.
b) operational-- not having this suck the life out of the project
--it may, and you will have to face that. most likely you can say that you share ownership of the code/ idea and you can not exclude each other from using it, else release it to the public domain and make sure that either of you can use it along with the world. the value in something is being able to move it forward, not in what you have already produced. if you are so early in the company its likely that you have not produced enough to directly execute, you will need to still move the code/ project forwards. quite a bit.
c) legal -- I don't want a Facebook/ConnectU situation down the road
-- rethink the problem and solution, for our group, we agreed to own our own code up until the point it was real, maybe you loose a bit of the code, but if there was no nda between members you can go off an recreate it with your own twist. not every idea is novel and unless the patent process was started then that maybe your defense moving forwards.
d) strategic -- not that I expect it to happen, but what's to stop my-soon-to-be-ex-co-founder from taking the idea and finding someone else to execute it? [insert standard boilerplate here about ideas being worth nothing without execution]
consumers like choice and having core differences in values between two competing products helps define the market better and broader. if you are going to compete head to head with a co-founder i am sure you are going to have different core values to derive as a niche. but, even though you are competing, you will be sharing the burden of advertising and developing your market. Java, helped sell .Net; friendster, helped sell MySpace and Facebook; hotmail, helped sell gmail, etc.... competition is good, and a market without any might not be much of a market at all. do not fear the genre, find ways to embrace it.
you might find that you can form two separate businesses that share an initial code base and your partner might go for it if he feels you are driving the company in the wrong direction too.