Question

Which of the following can be treated as disadvantage of HUF form of business?

• A. A HUF business is not affected by the insolvency or death of any member including that of karta.
• B. An inefficient karta can do harm to the business.
• C. The continuity of business is always under threat. It may be due to a small rift within the family and if a co-parcener asks for a partition the business is closed.
• D. Since the karta has absolute freedom to manage the business, there is scope for him to misuse it for his personal gains.

Answer 1

The correct option is B An inefficient karta can do harm to the business.

Despite having various advantages, the HUF form of business has disadvantages as well. One of them could be misuse of power. Since the karta has absolute freedom to manage the business, there is a scope for him to misuse it for his personal gains. An inefficient karta can do harm than good to the business.