HUF(Joint Hindu Undivided Family)
HUF ( Joint Hindu Undivided Family ) is a unique form of business organisation found only in India. It is governed and dictated by the Hindu law .
The head of such a joint family business is the eldest member of the family , which is known as 'Karta' . He is the main person responsible for the business and the finances . Any person born into the family ( Boy or Girl ) upto the next coming three generations is a part of the HUF . These members are the co-parceners .
Features of HUF ( Joint Hindu Family ) :- A HUF has the following features -
1- Formation :- To begin a Hindu Undivided Family (HUF) there must be a minimum of two related family members . The formation of a HUF does not require any documentation and admission of new member by birth .
2- Liability :- The liability of all the various co-parceners is only upto their share of the property or business . But the Karta being the head of the HUF has unlimited liability .
3- Control :- The entire control of the entity lies with the Karta .
4- Continuity :- The HUF ( Hindu Undivided Family ) can be continued perpetually . At the death of the Karta , the next eldest member will become the Karta .
5- Minority :- Even minor members will be a part of the HUF . But they will enjoy only the benefits of the organisation .
Advantages of HUF ( Hindu Undivided Family ) :- A HUF has the following advantages -
1- Easy to Start :- It is very easy to start the Joint Hindu Family business . No legal formalities are required to be faced , such as registration . It requires no agreement .
2- Secrecy :- In Joint Hindu Family Business , all the decisions are taken by the 'Karta' himself . He is in a position to keep all the affairs to himself and maintains perfect secrecy in all matters .
3- Prompt Decision :- Karta being the sole master , he takes prompt decisions and makes advantages of the opportunity .
4- Credit Facilities :- In joint Hindu Family Business the credit facilities are more . One reason for this is that liability of the 'Karta' is unlimited . Karta is having personal relations with others , which are also helpful in raising credit .
5- Freedom Regarding Selection of Business :- The Karta is at freedom to select any business of his choice . He has not to depend on others .
Disadvantages of HUF ( Hindu Undivided Family ) :- The disadvantages of HUF are as follows -
1- Limited Membership :- The membership of the business is limited to the members of family only . No outsider can become the member of Joint Hindu Family business .
2- Limited Source of Capital :- The capital is limited only upto the resources of one family .
3- Limited Managerial Skill :- The Karta may not be able to perform all managerial functions because of limitations of time , energy and skills .
4- Unlimited Liability :- The liability of Karta is unlimited . The Karta is not only liable to the extent of his share in the business but his separate property is equally affachable and amount of debt can be recovered from his separate property . This factor puts a ceiling on the growth and expansion of the business .
5- Misuse of Power :- The management of a Joint Hindu Family business is centralized in the hands of Karta of the family . No other member can interfere in his management . This may lead to the misuse of power and the Karta may use the power for his personal interest .
HUF ( Joint Hindu Undivided Family ) is a unique form of business organisation found only in India. It is governed and dictated by the Hindu law .
The head of such a joint family business is the eldest member of the family , which is known as 'Karta' . He is the main person responsible for the business and the finances . Any person born into the family ( Boy or Girl ) upto the next coming three generations is a part of the HUF . These members are the co-parceners .
Features of HUF ( Joint Hindu Family ) :- A HUF has the following features -
1- Formation :- To begin a Hindu Undivided Family (HUF) there must be a minimum of two related family members . The formation of a HUF does not require any documentation and admission of new member by birth .
2- Liability :- The liability of all the various co-parceners is only upto their share of the property or business . But the Karta being the head of the HUF has unlimited liability .
3- Control :- The entire control of the entity lies with the Karta .
4- Continuity :- The HUF ( Hindu Undivided Family ) can be continued perpetually . At the death of the Karta , the next eldest member will become the Karta .
5- Minority :- Even minor members will be a part of the HUF . But they will enjoy only the benefits of the organisation .
Advantages of HUF ( Hindu Undivided Family ) :- A HUF has the following advantages -
1- Easy to Start :- It is very easy to start the Joint Hindu Family business . No legal formalities are required to be faced , such as registration . It requires no agreement .
2- Secrecy :- In Joint Hindu Family Business , all the decisions are taken by the 'Karta' himself . He is in a position to keep all the affairs to himself and maintains perfect secrecy in all matters .
3- Prompt Decision :- Karta being the sole master , he takes prompt decisions and makes advantages of the opportunity .
4- Credit Facilities :- In joint Hindu Family Business the credit facilities are more . One reason for this is that liability of the 'Karta' is unlimited . Karta is having personal relations with others , which are also helpful in raising credit .
5- Freedom Regarding Selection of Business :- The Karta is at freedom to select any business of his choice . He has not to depend on others .
Disadvantages of HUF ( Hindu Undivided Family ) :- The disadvantages of HUF are as follows -
1- Limited Membership :- The membership of the business is limited to the members of family only . No outsider can become the member of Joint Hindu Family business .
2- Limited Source of Capital :- The capital is limited only upto the resources of one family .
3- Limited Managerial Skill :- The Karta may not be able to perform all managerial functions because of limitations of time , energy and skills .
4- Unlimited Liability :- The liability of Karta is unlimited . The Karta is not only liable to the extent of his share in the business but his separate property is equally affachable and amount of debt can be recovered from his separate property . This factor puts a ceiling on the growth and expansion of the business .
5- Misuse of Power :- The management of a Joint Hindu Family business is centralized in the hands of Karta of the family . No other member can interfere in his management . This may lead to the misuse of power and the Karta may use the power for his personal interest .
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