Joint Hindu Family Business is diverse sort of association which is discovered uniquely in India. As the name recommends, it is sort of association in which every one of the individuals from Hindu Undivided Family oversee and control the business with the bearing of leader of the family. It’s anything but a Partnership.
Features of Joint Hindu Family Business
- Formation: Minimum two related family members to begin a Hindu Undivided Family. There must be a few resources, business or genealogical property that they have acquired or will in the long run acquire. The formation of a Hindu Undivided Family does not require any documentation and admission of new members is by birth.
- Liability: The liability of all the various co-parceners is only up to their share of the property or business. So they have limited liability. But the Karta been the head of the Hindu Undivided Family has unlimited liability.
- Control: Karta is the person who has full control over the Hindu Undivided Family business.
Karta take advice from all the members but he not bound to accept their decisions.
- Continuity: The Hindu Undivided Family can be continued perpetually. At the demise of the Karta, the following oldest part will turn into the Karta. However, keep in mind a Hindu Undivided Family can be dissolve if all members mutually agree.
- Minor Members: The person who has taken birth in Hindu Undivided Family can be a member of the family business. Therefore, a minor can also be a member of the family.
Merits of Joint Hindu Family Business
- Effective control : The decision making power lies only with the Karta and no other member has the right to interfere in his decision. In this manner, the Karta can take instant and adaptable choices that guarantee viable control in the association.
- Continued business existence : After the death of Karta, the next eldest member takes up his position. So, it does not affect the activities of the business.
- Limited liability of members:All the liability of the members is restrict to extent of their share in the business.In any case, the Karta has boundless risk because of his total hang on the business.
- Increased loyalty and cooperation :The business operations carried on by the members of a family jointly. This increases loyalty and cooperation with each other without any hindrance.
Limitations of Joint Hindu Family Business
- Restricted assets : The principle wellspring of capital under this sort of business is the hereditary property. Along these lines, the business experiences the issue of restricted capital.
- Boundless risk of Karta : The obligation of the Karta is boundless. If there should be an occurrence of misfortune, karta’s close to home property can used to reimburse business obligations.
- Predominance of Karta : The whole control and the executives of the business lies with the Karta. Now and then, the individuals may not concur with the choices taken by the Karta. This may make struggle among them.
- Constrained administrative abilities : No man on this planet is impeccable. If there should arise an occurrence of Joint Hindu Family Business, leader of the family holds the situation of Karta by the Hindu Succession Act, 1956.