If he's as talented as you say he is, I'm guessing he's frustrated with himself too, for not delivering on your shared goals. Since you've been friends for many years, that friendship may be interfering with your ability to give and take frank, direct feedback from each other in a professional setting. He doesn't want to let you down, and you're afraid you've made a mistake in trusting your business to a friend. Instead of a binary, "either he continues to bring in all this drama, or I nuke the team" approach, I urge you to create a shared growth/change plan with shared benchmarks for improvement.

Here are some suggestions:

• As an earlier poster said, don't do anything drastic. Make sure you take space to calm down and ensure you aren't emotionally charged when you start this conversation.
• Affirm your shared goals. Remember, you care about a) your friendship and b) your business success. He probably cares about both of these things too. Say things like, "I think we need to have a tough conversation because clearly things aren't going as well as we'd hoped when we started. When things get tough/unpleasant, let's remember we want to come out of this conversation as good friends with a wildly successful business."
• Start with inquiry. How does he think things are going? What's getting in the way of things improving, from his perspective? If you disagree with his point of view, don't respond right away. Say things like, "I haven't thought about it that way. Let me take a beat to process everything you've said."
• Be prepared for him to say things that are critical of your leadership and management style, too. These conversations cut both ways. I highly recommend reading/skimming "Thanks for the Feedback" by Douglas Stone and Sheila Heen. It's chock-full of tools to ensure you're ready to receive any criticism from your friend/employee with a level head and keep things professional rather than personal.
• Define your problems with his actions more specifically. What do you mean by "drama?" What does the "growth" you desire look like (new clients? faster progress on a major project? better time management?). Make sure he understands exactly what's not going right, from your point of view.
• If the above steps go well, create a timeline with an improvement plan. Say, "We're going to do x y and z differently for 1 month. If things don't get better, we'll have another conversation." Remember, this may require you to change, as well as your employee, if it's going to work.
• If your friend isn't interested in working through a process like this with you, then and only then, broach the topic of parting ways as business partners.

Remember to fully weight the costs/benefits of "going back to the drawing board" and losing half your team vs working on specific, tangible steps you two can take to improve the partnsrhip.

Good luck!