My personal advice would be to freelance, at least for a while. Do you or your friend have any experience in actually creating and running a business?
You need to look not only at the initial costs of startup, but you need to have a viable business plan in place. You need to know that you'll be making enough money to support yourselves, pay for your rent etc.
Otherwise, you rent out this studio space for $300/month, and struggle to make that back per month, not to mention the outlay on cameras, lenses etc.
If you're serious about making this a profitable business, come up with a tangible business plan, and you can even borrow the capital to make your initial equipment investments. You should have no issue paying them off once business rolls in.
But, business needs to roll in for anything to be worth it - it's not simply a matter of 'build it and they will come' - there are better equipped photography studios than you guys will be that will be competing with you; in fact judging by what you're saying you won't be as equipped or experienced as shopping mall baby photographers. And you're directly competing with them. So you better have something to offer, otherwise the entire endeavour is a waste of money.
This isn't a 'lecture' or 'trying to be rude' - it's being realistic.
I'm not sure what your portrait photography skills are like (or your friend) but keep in mind that studio-based portrait photography is completely different to any other photography - it's nothing like shooting outside, the lighting conditions are completely different, and it's also different to shooting film as you're not necessarily lighting for a 'scene' (although sometimes you are). You also, in general, can't just open up to f/1.4 and go to town with your shallow DOF because people usually want to be able to see their whole face in focus. If your portrait photography skills aren't up to par, I'd work on them before opening up - people won't be happy if you take hours to tweak the lighting because you're not 100% sure how to work it, especially if you're charging by the hour.