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Starting a Business
Choosing a Form of Business Organisation:
Joint Hindu Family Business
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Joint Hindu Family Business is a distinct type of organisation which is unique to India. Even within India its existence is restricted to only certain parts of the country. In this form of business ownership, all members of a Hindu undivided family do business jointly under the control of the head of the family who is known as the 'Karta'. The members of the family are known as 'Co-parceners'. Thus, the Joint Hindu Family firm is a business owned by co-parceners of a Hindu undivided estate. Its main features are :-
  • It comes into existence by the operation of Hindu law and not out of contract. The rights and liabilities of co-parceners are determined by the general rules of the Hindu law.

  • The membership of this form of business is the result of status arising from the birth in the family and its legality is not affected by the minority. Originally, only three successive generations in the male line ( grandfather, father and son) constituted the membership of this organisation. By the Hindu Succession Act, a female relative of a deceased member or a male relative of such a female member was made eligible for a share in the interest of the related member ( called co-parcener) at the time of his death. There is no legal limit to the maximum number of members.

  • Registration is unnecessary, but the rights of its members to sue third parties for claims of debt remains unaffected.
  • It is managed generally by the Karta. He has the authority to obtain loans against the family property or in other ways. Other members have no right of management nor to contract loans binding on the joint-family property.

  • The manager or the Karta has the last word in the formulation of all policies and in their execution. He has unquestioned authority in the conduct of the family business.

  • The Karta has unlimited liability while the liability of the other members is limited to the value of their individual interests in the joint family.

  • The firm enjoys continuity of operations as its existence is not subject to the death or insolvency of a co-parcener or even of the Karta himself. Thus, it has a perpetual life like the public limited company.

Advantages

  • Ease of formation

  • Continuity of operations

Disadvantages

  • Confined to Joint Hindu families

  • Relatively limited capital

  • Limited managerial talents

  • Unlimited liability of the Karta

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