Also, is he entitled to the security deposit (minus any repair expenses)?

If I were in your shoes and you wanted to keep them on MTM I would have them still sign a MTM lease and make the one resident pay a deposit, assuming you can sign new MTM leases in your area.I personally would still probably shift them to longer-term leases anyway, but it's not a bad idea to feel them out for a few months.

Most legal disputes are over security deposits and for small amounts.

Should I have them pay right now or out of security deposit whenever they move out? 

The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations.

Ziprent will write the lease, execute it, then get the tenant in the unit and collect first month's rent and deposit.

It can be a huge pain to get started but you do get your rent direct deposit every month.

Laminate countertops can hold up pretty well and if damaged, will need to come out of the security deposit - lower cost product, so a larger percent of it gets paid for if damaged. 

I also let him know that I would need 3 months of bank statements showing deposits going into his account from the business.

And this is CRE, so it's cutthroat, it's no one's problem but your own if you lose an earnest money deposit.