An Introduction to Joint Hindu Family Business

Known as the Joint Hindu Family Business, it is a type of organisation that is only found in India. The operation of the law results in the formation of a Joint Hindu Family Firm. It does not exist as a separate and distinct legal entity from the members who make up the organisation.

The business of a Joint Hindu Family is governed by Hindu Law, rather than the Partnership Act, which governs other businesses. It is only through birth or marriage to a male person who is already a member of the Joint Hindu Family that one can become a member of this type of business organisation.

“A composite family is formed when two or more families agree to live and work together, pool their resources and labour into a common stock, and share both profits and losses.”

There are two schools of Hindu law: Dayabhaga, which is prevalent in Bengal and Assam, and Mitakshara, which is prevalent throughout the rest of the country. Dayabhaga is the more traditional school of Hindu law. According to Mitakshara law, a son has a natural right to inherit the property of his joint family if he is born into it. It means that when a son is born into a family, he automatically becomes a co-owner of the property that the family owns together.

The Joint Hindu Family’s business is controlled and managed by a single individual who is referred to as the ‘Karta’ or the ‘Manager’. Initially, the Karta of the family manager works in consultation with the other members of the family, but he has the final say in everything. Karta’s liability is without limit, whereas the liability of the other members is limited to their respective shares in the business.

Joint Hindu Family Business Examples

• Reliance Industries Limited.
• Tata Sons Private Limited.
• Mahindra & Mahindra Limited.

• Haldiram’s Private Limited.

Advantages of Joint Hindu Family Business:

The chief advantages of Joint Hindu Family Business are given below:

1.Easy to Start:

It is extremely simple to establish a Joint Hindu Family Business. There are no legal formalities to complete, such as registration, that must be completed. It does not necessitate agreement.

2.Efficient Management:

The management of the Joint Hindu Family Business is centralised in the hands of the family’s Karta (head). Karta is the decision-maker in this company and is responsible for seeing that all decisions are carried out with the assistance of the other members. No other team member is allowed to interfere with his management.

3.Secrecy:

In a Joint Hindu Family Business, all decisions are made by the ‘Karta,’ who is the head of the organisation. He’s in a position to keep all of the affairs to himself and to maintain complete secrecy in all of his dealings.

4.Prompt Decision:

The Karta is the only person who has the authority to control and direct the operation. When making decisions, he is not required to consult with anyone. This ensures that decisions are made as soon as possible. Because he is the sole master, he is able to make quick decisions and take advantage of any opportunities that arise.

5.Economy:

Any business’s success is dependent on its ability to operate efficiently. When it comes to Joint Hindu Family Business, it is well-balanced and well-maintained. The Karta of the family is extremely frugal and conservative with his spending.

Disadvantages of Joint Hindu Family Business:

The disadvantages of Joint Hindu Family Business are given below:

1.Limited Membership:

Individuals who are not members of the business’s extended family are not permitted to do so. A member of the Joint Hindu Family Business cannot be recruited from outside the family.

2.Limited Sources of Capital:

The amount of capital available is only limited by the resources of a single family. The amount of money available is insufficient to meet the needs of the business in terms of expansion. As a result, the company’s overall size remains small. Due to a lack of financial resources, the Karta is unable to take advantage of large-scale economies.

3.Limited Managerial Skill:

The Karta of the family is responsible for all of the managerial functions that are necessary for the successful operation of a business. Because of limitations in terms of time, energy, and skills, the Karta may not be able to perform all managerial responsibilities. Because of the small scale of operations and financial resources available, it may not be possible to secure the services of experts in a variety of fields such as purchasing, production, marketing, and distribution.

4.Unlimited Liability:

The liability of the Karta is completely limitless in nature. However, the Karta’s liability does not end there; his separate property is also attachable, and the amount of debt owed can be recovered from his separate property as a result. This factor places a cap on the amount of growth and expansion that the company can experience.

5.Misuse of Power:

An Indian Joint Hindu Family Business is managed centrally by the Karta, who is the family’s chief executive officer. No other member has the authority to interfere with his management. This could lead to the abuse of power, with Karta using his position to further his own personal interests.

Conclusion:

The joint Hindu family, or Hindu undivided family, or simply HUF, is an extended family prevalent throughout India. A joint Hindu family business is composed of many generations that live in the same household and are bound by a common relationship, that is to say, it is composed of all the persons who are direct descendants of one common ancestor. Under section 2(31) of the income-tax Act, 1961, the Hindu undivided family is treated as a person. Also, for the purpose of assessment under the act it is, HUF, is regarded as a separate entity.