For Louis Cerotti, running his family business has been a joy. After operating a Key West uniform and linen laundry in the 1950s, Cerotti moved to Miami and in 1966 opened his current venture, Associated Uniform Rental & Linen Supply Inc. His children grew up with Associated Uniform, coming in and out of the office on a regular basis and later working in various jobs. Over the years Cerotti, now semi-retired at age 72, received plenty of offers to sell the business to uniform-industry heavyweights, but he chose to remain independent. "I always felt satisfied," he says.

Instead of selling out, two years ago Cerotti set the wheels in motion for the transfer of Associated Uniform and other assets to his heirs while minimizing estate taxes. "I was interested in how to keep the business in the family without the government taking everything," he declares.

Two of Cerotti's three children work in the business, which now has 100 workers in Miami and Orlando and posts close to $5 million in annual revenues. Son Dominick, 48, is president and operates out of Orlando. Daughter Cassandra and her husband work in the Miami office, she as bookkeeper and he as office manager.

Cerotti has planned for the future by setting up a family limited partnership, which enables business owners to reduce their taxable estates by giving partnership interests to family members. That was a smart move-the gift of a partnership interest is a better way to reduce an owner's taxable estate than cash gifts. Why? IRS rules allow a business owner to give an annual cash gift of $10,000 to a relative without being taxed. However, the owner with a $1 million business could give the relative a 2% partnership interest-doubling the effective value of the gift to $20,000-and still not be taxed because the IRS discounts partnership gifts by around 50%. "The use of family limited partnerships has become quite popular," says Jim Fielding, tax partner in the Orlando office of BDO Seidman, the accounting firm that worked with Cerotti.

The Taxpayer Relief Act of 1997, passed by the U.S. Congress and signed by President Clinton last year, includes a provision that the first $1.3 million in value of a qualified family-owned business or farm may be excluded from estate taxes. For businesses that meet qualifying requirements, the $1.3 million replaces the general estate tax exclusion, which is $625,000 in 1998.

RESOURCES

Succession And Estate Planning
Florida University-Related Membership Groups

Family Business Institute, Florida International University, Miami. Offers six seminars a year, an annual day-long conference and quarterly newsletters. Consultations also are available. Cost is $950 per year. Contact: Carmen McCrink, 305/348-4237.

Institute for Family Business, Nova Southeastern University, Fort Lauderdale. Serves south Florida family businesses with quarterly forums, breakfasts, a quarterly newsletter and limited consultations. Cost is $2,000 per year. Contact: Fredrick Reed or Peg Royle, 954/262-5089.

Conferences

"Managing Succession Without Conflict," a two-and-a-half-day conference sponsored by the Arthur Andersen Center for Family Business, will be held November 11-13, 1998, in Orlando. The fee is $1,995 for the first participant and $1,895 for each additional participant. Arthur Andersen also offers a monthly newsletter, The Family Business Advisor ($139 per year). Contact: Beth Brown, 800/758-7580.

"Family Business Academy" is a four-day conference sponsored by the Family Enterprise Center at Kennesaw State University and BDO Seidman LLP. The program will be held May 31 to June 4 in Kennesaw, Georgia, (north of Atlanta). Tuition is $1,800 for the first participant, $1,500 for additional participants. Call 770/423-6045.

Small Talk
Cheap Borrowing

Enterprise Florida is offering a new Enterprise Bond Variable Rate Program that provides small manufacturers and select not-for-profits with financing that is as much as 30% below the prime rate. The program allows the lead banks, SunTrust and First Union, to bundle loans for two or more projects into a single bond sale, reducing up-front costs for the borrower. To qualify, borrowers must obtain a letter of credit from a participating bank and use the money to finance fixed assets such as land, buildings and equipment. Loan amounts range from $500,000 to $2 million. For information, call Enterprise Florida at 407/316-4646.

Business Ethics

The University of Tampa's Center for Ethics is sponsoring "Initiating and Implementing an Ethics Program," a morning briefing on how businesses can develop an effective effort for managing legal and ethical issues in the workplace. The program is designed for small and medium-size businesses and will be held on Wednesday, April 29 from 8:00 a.m. to 11:00 a.m. To register ($75 fee), call 813/258-7415.

African-American Biz

The U.S. Small Business Administration (SBA) has initiated a new program to increase lending to African Americans interested in starting or expanding small businesses. To help market the SBA loan programs, the agency has enlisted the help of the National Urban League, the National Black Chamber of Commerce and others. By the year 2000, the SBA expects to guarantee 3,900 loans totaling $588 million annually to African American entrepreneurs through its 7(a) and 504 lending programs, double the 1,900 loans made last year.

TRANSITIONS
Succession Planning In 10 Steps

Who will run the business when you die? It's a question many business owners don't want to think about because it forces them to consider their own mortality. But for family-owned businesses, succession planning is crucial. Barton C. Francis, West Palm Beach-based director of personal financial counseling for Ernst & Young's Florida practice, begins by asking owners two questions: "What do you wish to cause to happen? and What concerns do you have?" Francis, author of Harcourt Brace Professional Publishing's "Succession Planning for the Closely Held Business," offers these tips on preparing a succession and estate tax plan.

1. Gather Financial and Legal Data. Begin the process by compiling information on the company's history, family relationships, financial statements, income tax returns, business plans and all pertinent legal documents, such as existing wills and trusts.

2. Build a Team. Cover all aspects of estate planning by working with an accountant, lawyer and perhaps your investment adviser and life insurance professional.

3. Value the Business. By drawing on your own knowledge as well as a business valuation expert, determine the price at which you realistically could sell the business to a willing buyer.

4. Estimate Estate Taxes. Work with your accountant to project the size of your taxable estate, the tax due and the amount of liquid assets available to pay the tax if you died today. Also estimate estate taxes at several future intervals, say five years from now and at a future date based on your life expectancy.

5. Explain Family Relationships. Discuss family members' roles in the business and their relationships with key, non-family employees. Invite your succession planning advisers to visit the business and observe management in action.

6. Identify Financial Goals. Decide how much income you'll need (or want) in retirement, how much you want to pass on to heirs and whether it is important for family members to continue to work in the company after your death.

7. Discuss Family Members' Interests. Talk to your advisers about whether family members want to manage the business in the future, hire outside management or sell it. If the family wants to keep the business, look at which family members have the necessary management skills and experience.

8. Pinpoint Potential Successors. Using feedback from advisers, consider who should own and run the business, how you'd like management to be structured and your concerns about the transition.

9. Come Up With a Game Plan. Once you decide what you want to accomplish in terms of business ownership, management and finances, work to solve problems, such as resolving family conflicts and training new management.