Define a Joint Hindu family firm. Explain its merits and demerits.
Answers
Joint Hindu family business is a type of business which has its individuality only in India and it is run by the family members from generation to generation.
This type of business is only limited among family members in which there would be no ego and other disputes which normally occur in company where the employees are from different tradition and groups.
Merits:
1. This can easily be formed with at least two members of the family and it has to have property from the ancestors.
2. It does not need any agreement to be formed.
3. It can be continued by the family member as long as they want to.
4. The capital for investment is limited in such a system.
Demerits:
1. Only a certain amount can be invested as a capital for the business.
2. As it only involves the family members, which would restrict kills as not all possess all the skills necessary for effective management.
3. The family members can access unlimited liability, which is not so good for a firm which may downgrade it.