Your borrowers need some legal advice about formalizing their business arrangement. They're just kind of making things up as they go along; e.g. saying its a partnership, but taxing the income to Mom and Dad and, possibly, paying junior a salary. If one of them dies or mom and dad get a divorce it will be a mess.
I don't find that Missouri has enacted the uniform partnership act i.e. if there is no partnership agreement you did not make a loan to a partnership regardless of what the memo says. Depending on the wording in your documents, it's likely that you have a loan for which each individual is jointly and severally liable. That's also not smart from their point of view.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.