Introduction:
- When a business enterprise is run by the family member and they run the
business as family business is called Joint Hindu Family business. It is said
that the Joint Hindu Family firm comes into existence by the law of
inheritance. It is important to note that the Joint Hindu Family firm with the
Joint ownership of the business is created by the operation of Hindu law and
not by the contract between the co-parceners The business of joint Hindu family is controlled and managed by the
eldest male member of the family who is known as ‘Karta’ and other members of
the family are called as “co-parceners”.
.
Definition: - “When a Joint Hindu Family (Hindu Undivided Family) conducts
business inherited by it as per Hindu law, it is called Joint Hindu Family
firm. Thus in a Joint Hindu Family firm, the business is passed on from one
generation to another.”
The following are some of the features of a Joint
Hindu Family Business
1.
Formation: - Joint Hindu Family firm is
formed as per the operation of Hindu law. Each member of the family becomes the
co-parceners in the family business by birth and not by the virtue (because of
talent) of an
agreement with other co-parceners.
1. Karta and
Co-parceners:
- The senior most member of the Hindu Joint family becomes head of the firm who
manages the business on behalf of the other members. He is known as Karta.
2. Joint
Ownership: -
The property of a Hindu business is jointly owned by the three generations. Karta
is the custodian of the joint property of the Joint Hindu Family firm.
3. Membership: -The membership of Joint Hindu
Family firm is unlimited. In other words, there is no limit for membership in
joint Hindu family business. Every child (even girls in the Maharashtra state) born in the Joint Hindu Family
becomes the co-parceners in the Joint Hindu Family firm by his/her birth.
4. Management: - The membership of Joint Hindu
Family business managed by the senior most member of the Joint Family is called
Karta. Karta is only manager, controller and co-coordinator of the business. He
can enter into contracts with third party with or without consulting with
co-parceners.
5. Profit
Sharing: - The
Hindu law does not specify the ratio of the profits and losses shared by Karta
and co-parceners in a Hindu family firm. The profit sharing ratio keeps on
changing depending upon the births and deaths in the family.
6. Quick
decisions: -Karta,
being the sole decision maker, can take quick decisions and act upon them immediately.
It is assumed that Karta’s decisions are always correct.
7.
Good Relations: -Small scale business, which is operated in local
market with a few employees. It is possible for Joint Hindu Family firm to
maintain personal contact with its customers and good relations with employees..
