Joint Hindu Family Business: Meaning, Features, Merits and Limitations

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Meaning of Joint Hindu Family Business

Any form of business which is owned by the members of a Joint Hindu family and in which the family possesses some inherited property. It’s known as “Joint Hindu Family Business”. It is also known as “Hindu Undivided Family”.

Features/Characteristics of the Joint Hindu Family Business

Hindu Joint Family

Hindu Joint Family

  • Membership by birth: Membership of a Joint Hindu family business is automatic by birth of a male child. It’s not created by an agreement among family members.

  • Management: The management vests in the Karta, the eldest member of the family. The Karta may associate other members of the HUF to assist him.

  • Liability: The Karta has unlimited liability.

  • No Maximum limit: There is no restriction on the number of coparceners of the HUF business. The membership is restricted to three successive generations.

  • Minor members: A male child at the time of birth becomes a coparcener. An HUF does not restrict membership to minors.

  • Unaffected by death: The HUF business continues even after the death of a coparcener including the Karta. It may come to an end if all the members notify that they are not members of the Joint Hindu Family.

Merit/Advantages of Joint Hindu Family Business

Hindu Joint Family Merits

Hindu Joint Family Merits

  • Economic security and status to the members: The Joint Hindu Family business provides members a sense of security and belonging because of the financial stake they possess in it also gives them status in society while dealing with others.

  • Continuity of business: The business has a continuity. Till such time that the members jointly do not decide to terminate it, the business continuous to exist.

  • Family pride: Members are likely to work with dedication, loyalty and care, because the work involves the family name. The business is not only an economic unit but also a matter of family prestige.

Limitations of Joint Hindu Family Business

  • Unlimited liability: The Karta is personally liable for all business obligations.

  • Limited access to capital: The Karta has limited scope for raising capital.

  • Karta too powerful: incompetent Karta may ruin the business since all business decisions are taken by him.

  • This form of business organization is perhaps the natural economic extension of the joint Hindu family. It serves to provide economic security and status to members.

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