So let's say I want to start a small business with a friend selling pocket protectors, would opening 2 individual S corps to do a partnership be the best way to approach this? Would there any tax benefits in doing it this way?

I'm was thinking that doing it this way would make it easier down the road, if one of us wants to back out, or we want to dissolve the partnership. Thoughts?

There are probably better people to answer this, but I don't think you would both want to be taxed as a business. I would think that having one entity with both of you as equal partners would be best and just make sure you have dissolution and buyout agreements in place from the beginning.

I don't think that gets you where you want to go. Coming together as 1 entity is going to be necessary just to operate the business (ie, for banking, ownership of assets, etc)

Your operating agreement anyway should layout what happens if someone wants to leave.

*I am a CPA, but not your CPA*

This structure will work, but is a bit redundant. If you are looking to limit your liability (which you should), you can accomplish the same thing with one LLC. It would also make it hard to get outside funding for the partnership if you need it, as most banks want to rely on the credit history of the partners. An S corp is a separate 'person' for legal purposes, so your personal credit might not be considered.

The big problem you have for tax purposes is the 25% passive income rule on S corps. If 25% or more of the S corp's income is from passive sources (i.e., a partnership you don't materially participate in), you bust the S election and all income is taxable at corporate rates.

You need to discuss your goals for this partnership with a CPA and/or attorney to set it up in the most efficient manner.
The cardinal rule - no matter what you do, HAVE IT ALL IN WRITING.

Assuming you mean mean a limited partnership, you'd have to form three LLCs under your scenario (1 for each LP plus one for the GP (standard practice)). Overly burdensome and redundant.

Like Erin said, your best bet would be to form an LLC and take the S election. LPs are great for passive income; LLCs are better for active business operations.

*I'm a corporate attorney, but not your attorney*

As a CPA I love this structure as it accomplishes a LOT of things. It can help promote fairness in a practice (partners want different things like cars, where to go for CE/CPE/Whatever, etc), is a slam dunk to limit SE tax and limit the ACA sur-tax too (assuming rules are followed).

I don't really like S-Corporations for true partnerships because of the necessity to keep everything equal when that isn't what everybody wants. Plus breakups can be messy.

I'm a CPA (who is on the phone with the IRS right now) but not your CPA. Call me if you want to change that. Everyone's situation is different based on facts and circumstances.

**Edit: Assumption: the way I see it basically 3 entities, 1 operating, and 2 that own the operating entity**