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JOINT HINDU FAMILY BUSINESS
Q.1.
Explain a Joint Hindu Family Business. (March 2000)
Ans. Meaning:
It is a form of commercial organization where a business is owned by the members
of a Hindu Family living jointly. When the business continues from one generation to
another in a Hindu family it becomes a Joint Hindu Family Business. A business where
a person becomes a member only by virtue of birth in the Hindu family is called
Joint Hindu Family Business
The Joint Hindu Family Business is a distinct form of business organization existing only
in India. It is an enlarged form of sole trading concern. The business comes into
existence by the operation of the Hindu Law.
Here the head of the family manages the business. He is known as Karta an d has
unlimited liability. The inheritors of the Joint Hindu Family Business are called Co
parceners. Their liability is limited.
Properties Act, 1937:
The act has given same rights to a widow as that to a male owner. She too can
participate in the b usiness and can demand partition.
Hindu Successive Act, 1956:
The act extends the line of co parcency interest to the female members born in a
Joint Hindu Family
Q.2.
Explain the Joint Hindu Family Business. What are the features /
characteristics of a Joint Hindu Family Business. (Mar. 2000, 2004; Oct. 2001)
Ans.

Meaning: Refer to Ans. 1

Features / Characteristics of Joint Hindu Family Business:

The features of a Joint Hindu Family Business are:
1.

Limited Capital:

The business has to depend upon the savings of the family (Karta and Co
parceners). Borrowing is possible from banks, friends and relatives but again the
amount would be limited.

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2.

Limited Liability of Co parceners:

The liability of the co parceners is limited to the extent of their share in the family
business i.e. their private property cannot be used to pay the debts of the firm.
3.

Unlimited Liability of karta:

The liability of the karta is unlimited i.e. if the assets of the b usiness are insufficient to
pay the debts of the firm, kartas private property can be used to pay off the debts.
4.

Joint Ownership:

The business is jointly owned by all the members of a Joint Hindu Family.
Three successive generations can inherit the business by reason of their birth in the
family.
5.

Sole Management and Control of Karta:

The head of the family is known as karta. He is the sole manager of the business. It is
he who controls the business. He has the right t o enter into contracts on behalf of the
other members.
The co parceners have no right to interfere in the activities of the karta. But if they
disapprove of his activities they can demand partition of the family business.
6.

Flexibility o f Operations:

This type of business offers a good deal of flexibility in business operations. The karta
can expand or contract the business, change the line of business or even close
down the business if the situation so demands. The co parceners normally agree
with the karta in business decision.
7.

Continuity and Stability:

This form of business is not dissolved due to the death, insanity or insolvency of a co
parcener or of the karta. The business is continuous in nature and stable in
existence.
8.

Business Secrecy:

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There is a great deal of business secrecy in the organization. The business secrets are
known to the co parceners in general and karta in particular.
9.

Minimum Government Regulation:

The business is subjected to least government regulations. Government has not laid
any rules and regulations over its working. There are hardly and rules and regulations
over expansion and closure of the business.
10.

Quick Decision Making:

Quick decisions and prompt actions are possible in this type of business as all the
powers are in the hands of karta and he is under no obligations to consult co
parceners.
11.

Limited Managerial Skills:

The karta and the co parceners may lack the necessary managerial skills that
are required in todays competitive business world. It may also not be possible to
appoint a specialist because of limited funds and limited nature of business.
12.

Local Area of Operations:

Joint Hindu Famil y Business are confined to a limited local area because of limited
capital and limited business skill.
13.

Lack of Economies of Scale:

Due to limited scale of operation, bulk buying and selling is normally not possible.
Thus the business may not be a ble to obtain economies of scale.
14.

Weak Bargaining Power:

A Joint Hindu Family purchases goods or raw materials on a small scale from
wholesalers leading to weak bargaining power. Secondly, they may not have the
skills of bargaining. Thus they may not be able to obtain competitive terms.
15.

Close Contact with Customers:

Karta and the co parceners have close contacts with the customers. Close
contract with customers help them to know their likes, dislikes, taste and preferences
and to serve them accordingly.

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16.

Close Contact with Employees:

Karta and the co parceners have close contacts with the employees. Close
contact with employees helps in avoiding frictions and conflicts and leads to better
relations.
17.

No Legal Status:

Like sole trading concern, Joint Hindu Family Business lacks legal status. Registration
of this type of business is not compulsory. The members and the firm do not have
separate legal entity.
18.

No Maximum Limit to Membership:

There is no maximum limit to membership in this type of business. Membership

depends upon the births and deaths in the family.
19.

Business Dominated by Male Members:

This type of business is dominated by male members of the family. Normally, female
members do not take part in the Joint Hindu Family Business.
20.

Division of Labour:

In a Joint Hindu Family Business, work is divided according to the skill and aptitude of
the co parceners. This leads to specialization and division of labour. E very co
parcener will work in the area in which he is good at.
Limited Capital, Joint Ownership, Flexibility of operations, Continuity and Stability etc.
are the features of a Joint Hindu Family Business.
Q.3.
Explain Joint Hindu Family Business. What are the merits / advantages of a
Joint Hindu Family Business.
Ans.3. Meaning Refer to Ans.1
Merits / Advantages of Joint Hindu Family Business:
The merits of a Joint Hindu Family Business are:
1.

Limited Liability of Co parceners: as in features point 2

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2.

Flexibility of Operations: as in features point 6

3.

Continuity and Stability: as in features point 7

4.

Business Secrecy: as in features point 8

5.

Minimum Government Regulatio n: as in features point 9

6.

Quick Decision Making: as in features point 10

7.

Close Contact with Customers: as in features point 15

8.

Close Contact with Employers: as in features point 16

9.

No Maximum Limit to Membership: as in features point 18

10.

Division of Labour: as in features point 20

11.

Efficiency and Economy:

As the karta and the co parceners are themselves involved in the business
overheads cost is less which brings in efficiency. All kinds of wastages and
undesirable expenses are also minimized which leads to economy.
12.

Socially Desirable:

It is socially desirable business as it looks after the interest of the disabled, old and
widows in the family.
13.

Goodwill:

Due to personal contacts with customers and employees a Joint Hindu Family
Business enjoys goodwill in the market which helps in generating higher sales to the
business.
Flexibility of operations, continuity and stability, business secre cy etc. are the merits
of a Joint Hindu Family Business.
Q.4.
Explain Joint Hindu Family Business. What are the demerits / disadvantages of
a Joint Hindu Family Business?

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Ans.4. Meaning: Refer to Ans. 1
Demerits / Disadvantages of Joint Hindu Fami ly Business:
The demerits of a Joint Hindu Family Business are:
1.

Limited Capital: as in features point 1

2.

Unlimited Liability of Karta: as in features point 3

3.

Limited Managerial Skills: as in features point 11

4.

Lack of Economies of Scale: as in features point 13

5.

Weak Bargaining Power: as in features point 14

6.

No Legal Status: as in features point 17

7.

Business Dominated by Male Members: as in features point 19

8.

Family Disputes:

Since this is a family business there may be continuous disputes amongst co

parceners or karta. These continuous disputes may affect the continuity of the
business.
9.

Cautious Approach:

The karta may adopt a cautious approach in taking business decision as his liability is
unlimited. He may not take risky but profitable business decision.
10.

Problem of Total Authority:

As far as business decisions are concerned, the karta enjoys tota l authority. Thus
there is a possibility that the karta may misuse the authority vested in him.
11.

Problem in Distribution of Profits:

There may be a problem in distribution of profits. Some co parceners may demand

higher share due to their hi gher efforts.
12.

Generates Inefficiency:

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As there is no direct relationship between efforts and rewards in this organization it

may result in inefficiency of the co parceners. An efficient and an inefficient co
parcener share the fruits of t he business equally.
13.

Cautious Approach of Karta: as features

Limited Capital, Hasty decision making, limited managerial skills, lack of economies
of scale etc. are the demerits of a Joint Hindu Family Business.
Q.6.
1.

Distinguish between:
Joint Hindu Family Business and Sole Trading Concern

Joint Hindu Family Business

Sole Trading Concern
(a)

Meaning:

It is a form of business organization which is jointly owned by all the members of a

Joint Hindu Family

It is form of business organization which is owned, controlled and managed by a

single person called sole trader
(b) Capital:
The capital of Joint Hindu Family Business can be more as compared to a sole
trading concern

The capital contributed by the sole trad er may be less as compared to the Joint
Hindu Family Business
(c)

Liability:

The liability of the co parceners in limited while that of the karta is unlimited

The liability of the sole trader is unlimited

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(d) Ownership:
There is joint ownership of business

There is sole ownership of business

(e)

Management:

The management of a Joint Hindu Family Firm is in the hands of karta who is
assisted by other members of the family

The management of a Sole Trading Concern is in the hands of the Sole Trader
(f)

Continuity and Stability:

It is continuous and stable in nature

It lacks continuity
(g) Number of members:
There is no limit on the number of members in a Joint Hindu Family Business

In this form of business orgainsation membership is restricted to one person only

(h) Law:
Business in subjected to Hindu Succession Act.

Sole Trading Concern is not subject to any specific law

(i)

Profit Sharing:

Profit and losses of the business are share d amongst the co parceners

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Profit is fully enjoyed by the sole proprietor, there is no sharing

(j)

Disputes:

There are chances of disputes between the co parceners and karta

There are no disputes as the sole trader is the sole owner of th e business
(k)

Specilisation:

There is possibility of specialisation as the co parceners can divide the work

amongst themselves

Since the proprietor manages alone everything, there is no specialisation.