"The Great thing about it is I don’t care if my children join the company," Hooker, 54, says. "I don’t want any of them to feel pressured."

PAUL HOOKER bought out his brother-in-law and partner in Sferra last year. Now his goal is to keep his children from having to liquidate the business to pay taxes.

Until last year, Hooker was hard at work and rarely thinking about the future of his business—until a confluence of buyout offers and worries about his partner’s health jolted both of them into a reality check. Last year, he put together a plan that will keep the doors of the executive suite open for his children, while providing a cash infusion so they won’t be forced to sell the company to pay off estate taxes.

He has talked with his son Andrew, 23, about the requirements for running the business. Andrew, who is an equity trader in New York, would need to spend several years learning the linen business, more or less as an apprentice, watching what goes on at the mills and factories in Italy—and he would have to become fluent in Italian. Hooker’s older son, Matthew, 28, works for a hedge fund in Chicago. His daughter, Stephanie, 26, is a director for a nonprofit social service agency in New York. His wife, Margo, works for Sferra in the accounts receivable department. The children all worked at the company warehouse during summer vacations, but all three are still figuring out exactly what they want to do with their careers.

Andrew suspects his father really wants to keep Sferra a family business, but he has encouraged Andrew to work three years at another company—and learn some business skills—before making the decision.

"We’ve joked about it forever," says Andrew. "Initially, deep down, I think he wanted it to be a family-run business . . . but the older he gets, he probably realizes the stress of running the business. Now he’s more, ‘I would love it if you would, but at the same time, I’d love it if you wouldn’t.’"

Hooker could sell the company outright tomorrow if he chose to. He has fielded numerous offers in recent years. He ascribes this to the rise in interest in alternative investments, as well as the strength of the brand built by him and his brother-in-law and former partner, George Matouk, who together converted a small wholesale operation into the high-profile brand. The company is known for its 1,020-thread-count sheets that sell for up to $15,000 and napkins that grace the White House dining room.

Hooker and Matouk acquired the company from its founder, the Sferra family. Italian patriarch Gennaro Sferra originally sold lace collars and doilies that he commissioned from nuns in Italian convents; he came to New York in 1891 with a plan to develop his market. His sons later expanded the venture. But in 1977, inheritor Albert Sferra, after learning that his only child wanted to become a pharmaceutical salesman instead of joining the business, approached Matouk about buying it. Matouk then asked Hooker to run it day-to-day in return for a partnership.

"It was one of those ‘in a New York minute’–type of things," Hooker recalls. After selling acoustic ceiling tiles in Jacksonville, Fla., he learned about table and bed covers directly from Sferra. "I just started growing the business," he says. "It could have been a widget company. I had a business degree and an idea of what I wanted to do."

However, as the business expanded, he began to fear that if anything happened to him, his family would be obligated to sell the company to pay the estate taxes. That concern also loomed large for Matouk, now 69, who began to develop health problems.

When they first began receiving offers from private equity fund managers, Hooker and Matouk turned them down as a reflex. But it was Hooker’s son Matthew who suggested that he take some meetings, even if he didn’t want to sell. The privately held company’s annual revenues totaled roughly $30 million, but the partners had never tried to place an actual value on the business and its assets. Ironically, after they determined a market price, they were able to work on a plan for the future.

Hooker recalls the day last year when he and Matouk left the Madison Avenue offices of a private equity fund in a daze. The two men had guessed the fund managers would value their business at a multiple of EBITDA—and calculated a range between $8 million and $15 million. But when they received an offer in that range, they suddenly had to consider real figures and form some concrete plans.

"I pitched George," Hooker says. "I said, ‘My kids are in their 20s—all college graduates—we have one house and a very simple lifestyle, but God forbid something happens to you or me. There is no value on this business right now, and with estate taxes taking 55 percent, we’re screwed.’" Hooker eventually offered to buy out Matouk’s share, an option they had discussed previously. Now it became reality. In the fourth quarter of 2006, Hooker and Matouk signed a formal acquisition agreement.

But the matter of who will take over still remains. Hooker would like to retire in five years and become a part-time advisor to the company, while devoting the bulk of his time to Challenged Youth Sports, a nonprofit program for developmentally challenged children that he and Margo started in New Jersey in 1990. To keep Sferra running when he is no longer chief executive, he has assembled a senior management team led by Ann Henry, a former executive at Martha Stewart Living Omnimedia.

"I don’t want to force any of my children to come into this business—I really don’t care, they’re doing fine," Hooker says. But if any of them decide to join the business, the company will make room. They will eventually inherit the estate, but Hooker is considering an employee stock-option plan. This would literally create an ownership culture—and could also allow Hooker to obtain equity from the company because employees would buy or earn shares in it.

Elizabeth Harris is a staff writer for Worth.

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