Long answer type question.
Define a Joint Hindu family firm. Explain features of joint Hindu family firm.
Define a Joint Hindu family firm. Explain features of joint Hindu family firm.
A joint Hindu family firm is owned and managed by the members of a Hindu undivided family. Membership in this business is by birth; this means that as soon as a child is born in the family, he/she becomes the member of the family business. This type of organisation is governed by the Hindu Succession Act 1956.
The following characteristics distinguish a joint Hindu family business from other forms of organisations:
i. Easy formation: The formation of a joint Hindu family business requires the existence of ancestral property and at least two family members. It is governed by the Hindu Succession Act 1956 and does not require any agreement for its formation.
ii. Liability: In a joint Hindu family business, the liability of all members except the Karta is limited to their amount of share in the family property. However, the liability of the Karta is unlimited.
iii. Control: The Karta is solely responsible for all the management and decision making in the family business. In other words, he has complete control over the business. Other members have a share in the decision making; however, the final decision is taken by the Karta only.
iv. Continuity: The continuity of a joint Hindu family business remains unaffected by the death of the Karta. This is because, in case of the death of the existing Karta, the next eldest member of the family takes over his responsibilities. Thus, the business continues to operate even after the death of the existing Karta.
v. Status of minors: In a joint Hindu family, membership in the family business is by birth. This means that as soon as a boy is born in a Joint Hindu family, he is automatically entitled to a share in the family business. In such cases, a minor has equal ownership rights over the inherited property. However, his liability is limited to the extent of his share in the joint property.
v. Quick decision making: In a joint Hindu family business, the Karta takes all important decisions; he need not consult other members of the family. Thus, it results in quick decision making.
The following characteristics distinguish a joint Hindu family business from other forms of organisations:
i. Easy formation: The formation of a joint Hindu family business requires the existence of ancestral property and at least two family members. It is governed by the Hindu Succession Act 1956 and does not require any agreement for its formation.
ii. Liability: In a joint Hindu family business, the liability of all members except the Karta is limited to their amount of share in the family property. However, the liability of the Karta is unlimited.
iii. Control: The Karta is solely responsible for all the management and decision making in the family business. In other words, he has complete control over the business. Other members have a share in the decision making; however, the final decision is taken by the Karta only.
iv. Continuity: The continuity of a joint Hindu family business remains unaffected by the death of the Karta. This is because, in case of the death of the existing Karta, the next eldest member of the family takes over his responsibilities. Thus, the business continues to operate even after the death of the existing Karta.
v. Status of minors: In a joint Hindu family, membership in the family business is by birth. This means that as soon as a boy is born in a Joint Hindu family, he is automatically entitled to a share in the family business. In such cases, a minor has equal ownership rights over the inherited property. However, his liability is limited to the extent of his share in the joint property.
v. Quick decision making: In a joint Hindu family business, the Karta takes all important decisions; he need not consult other members of the family. Thus, it results in quick decision making.
