Joint Hindu Family Business

Joint Hindu Family business is one of the oldest forms of business organization in the country. It refers to a form of organization wherein the business is owned and carried on by the members of the Hindu Undivided Family( HUF). It is governed by Hindu Law. If a person is born in the family then he/she will automatically become a member of the business.

    The business is controlled by the head of the family who is the eldest member and is known as Karta. The members have equal rights in the property of an ancestor irrespective of their gender (male or female). The members are known as Co-parceners.

Examples: Reliance Industries Ltd., Mahindra & Mahindra Ltd. Haldiram's Pvt Ltd.

Characteristics 

1. Formation: For the formation of the Joint Hindu Family business there should be at least two members in the family and an ancestral property to be inherited by them. No agreement is required for the business because membership is by birth.

2. Liability: The liability of all the members is limited to their share in the property of the business. However, the liability of Karta is unlimited.

3. Control: The control of the Joint Hindu Family business lies in the hands of Karta. He takes all the decisions and is authorized to manage the business. His decisions are binding on the other members of the family.

4. Continuity: The business continues even after the death of the Karta. The next eldest member of the family takes up the position of Karta. However, the business can be wind up with the mutual consent of members.

5. Minor members: The minor members of the family can also be the members of the business as the membership to the business is by birth.

Advantages

1. Effective Control: Only the Karta has decision-making power. This avoids conflicts among the members, as no one has the right to interfere. This also leads to quick decision making.

2. Continuity of business: The continuity of the business will not be get affected by the death of the Karta, because the next eldest member will take up the charge as Karta. So, there will be no fear of termination of business.

3. Limited liability of members: The liability of co-parceners is limited to their share in the business and consequently their risk is well defined and precise.

4. Increased Loyalty and Cooperation: As the business is run by the family members, there is a greater sense of loyalty towards each other. The growth of the business is an achievement for all the members of the family. This helps in securing better cooperation from all the members.

Limitations

1. Limited resources: The scope for expansion of the business is limited in the case of the Joint Hindu Family business. The capital is limited, as it mainly depends on the ancestral property.

2. Unlimited Liability of Karta: The Karta is not only burdened with the responsibility and management of the business but also suffers from the disadvantage of unlimited liability. His personal property may be used to clear the debts. 

3. The dominance of the Karta: The Karta individually manages the business. At times, that not be acceptable to all the members. This may cause conflict among the members and sometimes even may lead to a break down of the family business.

4. Limited managerial Skill: As the Karta can't be an expert in all areas of management, the business may suffer as a  result of unwise decisions. His inability to make proper decisions may result into poor profits or even losses for the organization.

   

      Nowadays there are very few joint families in the country. As the number of joint families are decreasing, the Joint Hindu Family business is also decreasing.