The joint Hindu family business is a separate form of the business unit. It is a particular form in India.
It is one of the oldest forms of business organisation and it was very popular in India when a joint family system was present.
Joint Hindu Family Business refers to a form of organisation wherein the business is owned and carried on by the members of the Hindu undivided family.
It is not formed by an agreement or by a contract, but it comes into existence by the operation of Hindu Law.
The oldest member in the family of the father is only allowed to conduct, manage, control and organise the business. He assumes full responsibility for business risks. He is called Karta or Manager.
Features of Joint Hindu Family Business:
1. Formation: At least two members should be there to form a joint Hindu family business. They inherit the property from their ancestors. It is not an agreement as membership is by birth.
2. Liability: The liability of the Karta is unlimited whereas the liability of other coparceners is limited to their share of interest in the coparceners interest.
3. Control: The management and control of joint Hindu Family Business are vested in the hands of the Karta only. His decisions are binding on the other members.
4. Continuity: Joint Hindu family business has relatively more continuous life than that of a partnership firm. It is not dissolved by the death or insanity of any coparcener.
5. Minor Member: Under this business, an individual becomes member by taking birth in the family. Therefore, a minor can also become its a member.
Advantages of Joint Hindu Family Business:
1. Effective Control: The Karta has absolute decision-making power. No one can interfere with his right to decide. Hence, prompt decisions and quick actions are possible.
2. Continued Business Existence: The continuity of business is not threatened by the death of the Karta on any coparcener.
3. Limited Liability Of Members: The liability of the Karta is unlimited whereas the liability of other members is limited to their share of interest in the coparcenary interest.
4. Increased Loyalty and Cooperation: The chances of better cooperation among member are more because they all belong to the same family.
5. Better Credit: Its creditworthiness is better than that of the sole trader.
Limitations Of Joint Hindu Family Business:
1. Limited Resources: The capital and financial resources of these businesses are limited as compared to the joint-stock companies.
2. UnLimited liability of Karta: The liability of the Karta is unlimited. In case of loss in business, the personal property of the Karta is held liable for payment of debts to the creditors.
3. Dominance Of Karta: The management of the Joint Hindu family business is vested in the hands of Karta only. Sometimes the members may not agree with the decisions taken by the Karta. This may create conflict among them and adversely affect business operations.
4. Limited Managerial Skills: The Karta alone looks after the business operations. Hence, with the expansion and growth of the business, management and control become difficult. His inability to decide effectively may result in poor profits or even losses.
A present joint Hindu family business system has considerably declined as we have adopted the western individual family system.
With the breakdown of the joint family system, this form of business has lost its old importance.
Different Types of Systems of Joint Hindu Family Business:
A) Dayabhaga and
B) Mitakshara System.
Dayabhaga system prevails in West Bengal where both the male and female members of the family are allowed to be coparceners.
On the other hand, the Mitakshara System prevails all over India except West Bengal. This system allows only the male members to be coparceners in the business.