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What is Joint Hindu Family Business (Hindu Undivided Family Business) ?

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Joint Hindu Family Business is a form of business, which is found only in India, and wherein the business is owned and carried on by the members of the Hindu Undivided Family (HUF). It is governed by the Hindu Law (The Hindu Succession Act, 1956). It is stated that the law of inheritance creates the Joint Hindu Family Business. The basis of membership in the business is birth and three successive generations can be members of the business.

Karta‘ is the eldest member of the family, who is also the head of the business. The entire business is controlled by the Karta, and his decisions are binding on all the members. All members have equal ownership right over the property of the ancestors, and they are known as ‘co-parceners‘.

The Hindu Undivided Family Business consists of two systems under the Hindu Law: Dayabhaga System and the Mitakshara System.

  1. Dayabhaga System: This system is common in West Bengal and Assam, and it allows both male and female members of the family to be co-parceners. A member cannot make a claim to inherited property until his/her father has passed away.
  2. Mitakshara System: This system prevails all over India except in West Bengal and Assam. Only male family members are allowed to be co-parceners in the business.

Features of Joint Hindu Family Business

The features of a Hindu Undivided Family are as follows:

  1. Formation: There should be at least two members and ancestral property must be inherited by the members for the formation of the Hindu Undivided Family Business. Each member of the family becomes a member of the business by virtue of birth, and there is no need for any agreement between the family members.
  2. Liability: The liability of all the members except the Karta is limited to the extent of shares in the co-coparcenary property of the business. However, the Karta has unlimited liability and his personal properties can be used for paying the debts of the business.
  3. Control: Karta controls the entire family business. He has the authority to manage the business. He takes all the decisions and his decisions are binding on all the co-parceners.
  4. Continuity: HUF is not affected by the death of the members. In the case of the death of the Karta, the next eldest male member in the family becomes the Karta. However, the business can be terminated with the mutual consent of the members.
  5. Minor Member: Minors can also be members of the business as membership in the business arises by the virtue of birth.

Merits and Demerits of Joint Hindu Family Business: Merits of HUF include ease in formation, limited liability of members, more commitment, etc., and demerits of HUF include limited resources, dominance of Karta, etc.

Last Updated : 26 Jul, 2023
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