Question

Answer the following question:

State the features of Joint Hindu Family Business.

Answer 1

The Joint Hindu Family Business or the Hindu Undivided Family (HUF) is a unique form of business organization found only in India. It is governed by the Hindu Law. It is governed by the Hindu Succession Act, 1956.
 The features of the Joint Hindu Family Business are as under:
(1) Formation as per the Hindu Law: The Joint Hindu Family Business comes into existence by the operation of Hindu Law. The members of a Hindu Undivided Family are the joint owners of the family business by virtue of birth.
(2) Karta and Coparceners: The senior-most member of the Hindu Undivided Family (HUF) becomes the head of the family business. He is called Karta. He has the sole right to conduct the business on behalf of other members of HUF. All other members of HUF are the joint owners of the business. They are called Coparceners.
(3) Joint ownership: The property as well as business of a Hindu are jointly owned by all the members of HUF. Three successive generations jointly inherit the property and business by the virtue of their birth in the family. This property and business (also called ancestral property) remain under the custody of Karta.
(4) Membership: There is no restriction on the minimum and maximum number of membership in the Joint Hindu Family Firm. Every child (even a girl in the State of Maharashtra) born in the HUF becomes its member by virtue of birth. The number of members (coparceners) fluctuates or changes with the births and deaths in the family.
(5) Management: The joint Hindu family business is managed by the Karta. He is the only manager, controller and co-coordinator of the business. While conducting the business, Karta can make contracts with third parties, draw bills of exchange, issue receipts, sell or mortgage property of HUF and purchase a new property in the interests of coparceners.
(6) Profit-sharing: The Hindu law does not mention the ratio in which profits or losses of the business are to be divided among its members, including the Karta. The profit-sharing ratios vary according to the number of births and deaths in the family.
(7) Quick decision: The Karta being the single manager, decision-maker and controller of business, can take quick decisions on various matters relating to business and implements them immediately.
(8) Good relations: On account of the business conducted by the Joint Hindu Family in the local market with a few employees, it is possible for this organisation to establish and maintain personal and close contacts with their customers. This also helps to maintain good relations with the employees.