Introduction to HUF
The Joint Hindu Family Business is a distinct form of organisation peculiar to India. Joint Hindu Family Firm is created by the operation of law. It does not have any separate and distinct legal entity from that of its members. The business of Joint Hindu Family is controlled under the Hindu Law. The membership in this form of business organisation can be acquired only by birth or by marriage to a male person who is already a member of Joint Hindu Family.
“When two or more families agree to live and work together, invest their resources and labour jointly and share profits or losses together, then this family is known as composite family or HUF”
Example: C.Roy & Co (a chartered accountant firm)
There are two schools of Hindu Law-one is Dayabhaga which is prevalent in Bengal and Assam and the other is Mitakshara prevalent in the rest of the-country. According to Mitakshara law, there is a son’s right by birth in the property of joint family. It means, when a son is born in the family, he acquires an interest in the property jointly held by the family. Today Hindu succession Act 2005 is applicable to all male and female members of a HUF.
The main characteristics of Joint Hindu Family Business are given below:
The business of the Joint Hindu Family is controlled and managed under the Hindu law.
All the affairs of a Joint Hindu Family are controlled and managed by one person who is known as ‘Karta’ or ‘Manager’. The Karta is the senior most male member of the family. The members of the family have full faith and confidence in Karta. Only Karta is entitled to deal with outsiders. But other members can deal with outsiders only with the permission of Karta.
The membership of the family can be acquired only by birth. As soon as a child is born in the family, that child becomes a member. Membership requires no consent or agreement.
Except the Karta, the liability of all other members is limited to their shares in the business. The amount of debt can be recovered from his personal property also.
The death, lunacy or insolvency of any member of the family does not affect the existence of the business of Joint Hindu Family. The family goes on doing its business.
In a joint family firm, only Karta has the implied authority to enter into a contract for debts and pledge the property of the firm for the ordinary purpose of the businesses of the firm.
In a Joint Hindu Family firm even a new born baby can be a co-parcener.
The Joint Hindu Family business can be dissolved only at the will of all the members of the family. Any single member has no right to get the business dissolved.