Merits and Limitation Of Jhf Form Of Business Organisation

Merits Of Jhf Form Of Business Organisation

Since Joint Hindu Family business has certain peculiar features as discussed above, it has the following merits.

(a)  Assured Shares in Profits: Every coparcener is assured of an equal share in the profits irrespective of his participation in the running of the business. This safeguards the interest of minor, sick, physically and mentally challenged coparceners.

(b) Quick Decision: The Karta enjoys full freedom in managing the business. It enables him to take quick decisions without any interference.

(c)  Sharing of Knowledge and Experience: A JHF business provides opportunity for the young members of the family to get the benefits of knowledge and experience of the elder members. It also helps in inculcating virtues like discipline, self-sacrifice, tolerance etc.

(d) Limited Liability of Members: The liability of the coparceners except the Karta is limited to the extent of his share in the business. This enables the members to run the business freely just by following the instructions or direction of the Karta

(f)   Continued Existence: The death or insolvency of any member does not affect the continuity of the business. So it can continue for a long period of time.

(g)  Tax Benefits: HUF is regarded as an independent assessee for tax purposes. The share of coparceners is not to be included in their individual income for tax purposes.

Limitation Of Jhf Form Of Business Organisation

(a)  Limited Resources: JHF business has generally limited financial and managerial resource. Therefore, it is not considered suitable for large business.

(b) Lack of Motivation: The coparceners get equal share in the profits of the business irrespective of their participation. So generally they are not motivated to put in their best.

(c)  Scope for Misuse of Power: Since the Karta has absolute freedom to manage the business, there is scope for him to misuse it for his personal gains. Moreover, he may have his own limitations.

(d) Instability: The continuity of JHF business is always under threat. A small rift within the family may lead to seeking partition