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What Are the Features of a Joint Hindu Family Business

Nidhi Nangia
By Nidhi Nangia. Updated: January 27, 2017
What Are the Features of a Joint Hindu Family Business

Joint Hindu family business is one of the most ancient forms of businesses done only in India. This is a type of organization which is owned and operated by the members of a family only. A person only needs to be born in the family to be a part of the organization. As many as three generations of the same family can be involved in a Joint Hindu family business. The head of the family, usually the eldest person in the family, is the controlling member of the business, and all others exercise equal rights over ownership, as the Tata family for example. We have already told you How to Start a Family Business. Read on this OneHowTo.com article to know what are the features of a joint Hindu family business.

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  1. Formation and operation
  2. Members of a joint Hindu family business
  3. Stability of a joint Hindu family business
  4. Profits and loss share

Formation and operation

A joint Hindu Family business is not created by any agreement or contract, because it exists only by operation of Hindu law. No partnership firms are formed either. Forming a joint Hindu family business is extremely easy, as no legal formalities are required to be fulfilled. As a joint Hindu family business is bound to the Hindu law, there is no compulsion of getting the organization registered. Because an organization receives legal status only after registration, it does not enjoy legal status in the government. A business can run in the family for generations, with each new child becoming a member of the business.

Members of a joint Hindu family business

Basically, there are two kinds of members in a joint Hindu family business, i.e. karta and the co-parceners. The eldest male member of the joint family is the Karta, who is responsible for managing and controlling the business operations. Others members of the family are known as co-parceners, who become the member of the business right at the time of their birth. The head of the joint family is responsible for managing the business, and he has all the rights to take decisions without interference from any co-parcener. However, other family members can help or advise him for the benefit of all.

Stability of a joint Hindu family business

Although co-parceners do not have any right to interfere with the Karta’s decisions, any member who is not satisfied with Karta’s decision can ask for partition. These organizations have a stable and long life, and run for generations. They are not affected by deaths, insolvencies and insanities of any family members. If the Karta dies, the succeeding co-parcener will become the next Karta of the family business, and conduct business operations and activities as before. Business operations of this kind of business are highly flexible, and the Karta enjoys full rights to expand, change or even close down the family business. Because the business matters are kept by the family members only, this kind of business enjoys great deal of privacy and secrecy.

What Are the Features of a Joint Hindu Family Business - Stability of a joint Hindu family business

Profits and loss share

According to the Hindu Act of Succession, 1956, each member of the Hindu family has equal rights over losses as well as profits. The Karta is responsible for giving receipts, making contracts and drawing bills, but he cannot relinquish any debts due to the business. He has the right to sell or mortgage the family properties for successful operation of the business. If the business becomes bankrupt, the co-parceners’ share in the family’s property can be utilized for paying off the debts.

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What Are the Features of a Joint Hindu Family Business