A joint Hindi family business firms exists only in India . it comes into existence by the operations of Hindu Law . This form of business is a extension of sole trading concerns , which is managed by karta and supported by other family members
Joint Hindu Family Business is based in the principles of Mitakshara Law . Under this law , the property inherited by a Hindu male ( female in certain states ) from His / her father , grandfather , and great grandfather is ancestral property. three successive generations becomes joint owners of the property by virtue of their birth in the family .
The inheritors of a joint Hindu family business are called co – parceners . it is to be noted that the Hindi succession act , 1956 has extended the line of co – parcenery interest to female members born in a joint hindi family .
In the state of Maharashtra , the female members are eligible to co – parcenery interest with effect from June 22 , 1994 . The business which is jointly owned by members of a joint Hindu family is called as joint Hindu family business .
Suitability of a Joint Hindu family business Are :
- Cooperates which require limited capital.
- Organization that cater to individual taste and preferences .
- Business which provide local convenience to the customers.
- Cooperates require a good degree of craftsmanship.
- Business that provide job work for large companies.
- That manufacture components and spare parts
Features of Joint Hindu family business
Joint ownership : The business is jointly owned by all the members of a joint Hindu family . three successive generations inherit the business or property due to their birth in the Hindu family . every child ( even female is certain states like Maharashtra ) born in a joint Hindu family becomes co-parcener.
Minimum Government regulations : This type of business is subject to least government regulations. there are least legal formalities . the Karta can start a new business or close down the existing one without much legal formalities .
Limited liability of Co-Parceners : The Joint owners i.e. the Co-parceners’ Liability is limited to the extent of their share in the family business .
- Co-Parceners has total authority to take decisions.
- Co-Parceners is the top manager in the organization.
- He is the leader or head of the Joint Hindu Family.
- He is liable to pay the dues out of his personal assets, if the situation so demands .
- The unlimited liability arises only when the property of the family business is inadequate to satisfy the claims of the creditors
- He has complete control over business activities
Sole control by Karta : The karta is the sole manager of the business . the co-parceners have no right to interfere in the activities of the Karta . The karta has right to enter into contracts on behalf of the family business .However , if the co- parceners do not approve the activities of the karta , they may demand partition of the family property
Membership : There is no maximum limit to membership on a joint Hindu family business . The membership depends upon the births and deaths in the family .
Other Features of Joint Hindu family
Limited capital : This type of business may face the problem of capital. The capital raised is from savings of the family members. The karta may also obtain funds from friends , and may also take loans from banks, but of limited amounts
Business Dominated by Male Members : This type of business is dominated by female members of the family , Normally female members do not take part in the Joint Hindu family Business
Business Secrecy : There is great deal of business secrecy. This is because the Joint Hindu family business need not publish accounts and other data . The competitors cannot easily obtain the information and secrets of Joint Hindu family Business .
Local Area Coverage : Normally , joint Hindu family business is confined to a limited local area , This is because of limited capital and the limited nature of the business
Close contacts : The karta and other members of the family can have close contacts with the customer, and employees. the Karta can satisfy the needs and wants of the customers.
Flexibility in operations : This type of business offers a good deal of flexibility in business operations. The karta can expand the business, change the line of business , or even can close down the business , if the situation so demand. The co-parceners normally agree with the karta in business decisions
Quick decision Making : In this type of business , there can be quick decision making , Thus is because the Karta can take decisions with or without consultations with the co-parceners.
Conclusion features of Joint Hindu Family
Credit Standing : This type of business do enjoy a good credit standing in the market . This makes it possible to obtain credit terms from the suppliers . The karta also can obtain funds from banks and others because of the goodwill enjoyed by the firms .
Business stability : there is business stability or continuity . the death of Karta may not affect the business continuity as the business can be carried on by the next head of the family.