1) To play co-op, first one of you must play the game and get to the safe house, as co-op is not available from the very start of the game.
2) When you have done that, and when the co-op is finally available the game should prompt you on how to invite friends.
3)Note that only the host gets to save his story progress, the other player just keeps his level and money, and he will have to do missions from the start if he decides to play the game alone.
A bit odd, how they made it that way, if you ask me, but thats the way it works.
I hope that helps.