In this article, we will discuss about Joint Hindu Family business and how is the Joint Hindu Family Business formed. Let’s start with a brief explanation of Joint Hindu Family Business:
A business, which is owned by family members who are living jointly, is known as Hindu Joint Family Business. In other words, a business which is continued from one generation to another generation is also called as Hindu Joint Family Business. At present, this form of business exists only in India within various Indian families.
The head of the family is the head of their business, which is known as a “Karta” and the other members of family, is called as a “Coparceners” of business. Hindu Joint Family business has enforced under the Mitakshara Law. In this business, an individual becomes a member of business by virtue of birth in a Hindu family. The entire profit of business goes into the common pool of family. The members of joint Hindu family business are not required for registering their business. In this form of business, Karta has enjoyed an unlimited liability but, on the other hand, their coparceners have a limited liability of their individual investment in their family business.
Well after discussing a small explanation about Hindu Joint Family Business, now we will discuss about how we can formed that kind of business in india and for which provisions, we are required. Here we mention the number of provisions, which are required for formation of Hindu Joint Family Business.
1. Membership from Birth:
In Hindu Joint Family Business, there are membership has been self activated from the member birth. It means, members of business are not required for contracting with company. They become a member from their birth, who are known as “Co-parceners”. They have an equal ownership on the hereditary property. In India, there are two systems (Laws) which have different provisions in case of membership.
(a) Dayabhaga System: In this system, male and female both are required to become Co-parceners of business and it prevails only in West Bengal.
(b) Mitakshara System: In this system, female and womens cannot be become a member of business, only male members are required and it allows in all over india except West Bengal.
2. Formation of Business:
For formation of business, there should be at least two members are present at time of formation and a hereditary property sho4. uld be formed for Hindu Joint Family Business. There membership is not created by an agreement in among individuals.
3. No restriction on maximum limit:
In Hindu Joint Family Business, there no restrictions are allowed on maximum numbers of members or Co-parceners. However, restriction will be allowed after three successive generations.
In Hindu Joint Family Business, the karta has an unlimited liability in business and all other members have limited liability in property of business.
The whole control of business has managed by eldest member of business, who is called as “Karta”. Karta has taken all decisions to manage the business.
6. Extreme opportunity for Minors:
In Hindu Joint Family Business, a family member get the membership from their birth, therefore, there minor can also become of Co-parcener of business.
The business will never end after the death of Karta. It will continue and appoint the other eldest member of business, who takes the position of Karta. The nature of business is stable.