explain merits and demerits of hindu undivided family
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Answer:
it helps in effective control and prompt decision making
Hindu Undivided Family
The business is managed by the head of the family (eldest member) and he is called Karta. However, all the members hold equal ownership over the property of an ancestor and they are called as co-parceners.
Meaning of Joint Hindu Family Business
It refers to a form of business organization which is owned and carried on jointly by the members of the Hindu Undivided Family (HUF).
It is also known as Hindu Undivided Family Business.
Characteristics of Joint Hindu Family Business:
Formation
There should be at least two male members in the family to form a HUF.
Ancestral property should have been inherited by members of HUF.
All of the members enjoy this property and have an equal share in that property.
Thus, any child taking birth in that family becomes a member of the HUF.
There is no requirement for an agreement to become a member.
Liability
There is limited liability of all the members or co-parceners in the Hindu Undivided Family business.
All the co-parceners have equal rights and shares in the property of Hindu Undivided Family business
The Karta has unlimited liability.
Control
Karta is the person who has full control over the Hindu Undivided Family business.
Karta can take advice from all the members but he is not bound to accept their decisions.
Continuity
After the “Karta” is deceased, the very next eldest member takes up the position of Karta in Hindu Undivided Family business.
The business can be divided and ended up by the mutual consent of the members.
Minor Members
The person who has taken birth in Hindu Undivided Family can be a member of the family business.
Therefore, a minor can also be a member of the family.
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Important terms which are used in a Joint Hindu Family Business:
(1) Hindu Undivided Family
The family who runs or carry on the business organization.
Hindu Undivided Family includes an eldest male member ‘Karta’ and the other male members called co-parceners.
(2) Karta
He is the person who is the head and eldest member of the family.
Karta is the person who has full control over business activities.
(3) Ancestral Property
It is the property of forefather or an ancestor and over which the members have equal right.
(4) Co-parceners
The male members related to three successive generations.
They have equal ownership right over the property of an ancestor.
Systems which are used in a Joint Hindu Family Business
There are two systems which are used in joint Hindu family business :
(1) Dayabhaga System
It prevails in West Bengal and allows both the male and female members of the family to be co-parceners.
A son gets right in the ancestral property only after the death of his father.
(2) Mitakashara System
It prevails all over India except West Bengal.
It allows only the male members to be co-parceners in the business.
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What are the merits of a Joint Hindu Family Business?
The merits of the joint Hindu family business are as follows:
(1) Effective Control
The Karta has full control over the business activities and takes a decision quickly.
No one can interfere in the decision of Karta as every member is bound to accept his decision.
Hence, it avoids clashes among the members and results in very speedy decision making.
(2) Continued Business Existence
After the death of Karta, the next eldest member takes up his position. So, it does not affect the activities of the business.
Hence, all the business activities are done smoothly, continuously without any threat.
(3) Limited Liability of Members
As all the liability of the members is restricted to the extent of their share in the business.
But the Karta has unlimited liability due to his complete hold on the business.
Hence, in case of dissolution of the business, Karta’s personal assets and his share will be liable.
(4) Expanded Loyalty and Cooperation
All the business operations are carried on by the members of a family jointly.
So, this increases loyalty and cooperation with each other without any hindrance.
Therefore, all the targets of the business can be achieved by the cooperation among the members and the Karta.
Limitations of a Joint Hindu Family Business
Below mentioned are the few demerits of a joint Hindu family business.