No matter what type of business you create, all the money you receive will be capital or equity. You pay no taxes on those funds. You can transfer a sole proprietorship's assets to most of those entities without creating any tax consequences. So just use your newfound money to pay off the loans before transferring them. Just be kind and distribute enough draws, dividends, or repayment of capital so they can pay their share of your business's taxes.
Nobody gets too upset over small change.
They don't have to be paid back if the company shuts down. However, if you make a profit, you will share it with your investors in proportion to their ownership of the company. All the money is capital. So you can use all of it for the growth of your business. The legal and accounting costs are minor in comparison to the cash flow you receive.