Merits and Demerits of Joint Hindu Family Business

joint Hindu family Business

Joint Hindu family business is a distinct form of business organization practised only in India. These businesses are not governed by any business law or partnership act. Joint Hindu family businesses are fully governed by Hindu law.

Merits and Demerits of joint Hindu family Business

Merits and Demerits of Joint Hindu Family Business
Merits and Demerits of Joint Hindu Family Business

Merits of joint Hindu family Business

Stability

Joint Hindu Family Business is more stable than other business. As it is a family business. So it is running forever even when the Karta is dead. new Karta will take the position of decided Karta.

Effective control

Joint Hindu Family Business have Effective control. it is run by a family so there are fewer chances of conflict and disagreements. Karta of the family. take all the decision but the whole family agree with Karta.

Management

Joint Hindu Family Business, management and control of the business by Karta of the family. every member of the family follows the decision of the Karta. so the management is very effective.

Loyalty and Co-operation

all the member in the Joint Hindu Family Business of a family or relative. So, loyalty and cooperation between all member. They all trust each other.

Liability

All member’s of the family have limited liabilities to the extent of their share in the ancestral property. Only Karta have unlimited liability. So Liability is not an issue for the member of Joint Hindu Family Business

Membership

There is no limit on the members. Any number of people in a family becomes a member of Joint Hindu Family Business. Members are the one who manages the business.

Demerits of joint Hindu family Business

Limited Funds

Joint Hindu family businesses suffer from a lack of sufficient capital. The source of funds for these businesses is limited. Business is fully dependent on its limited members of the family. These members have a very small amount to invest in business.

Lack of Management Skill

The whole business is managed by a single person. There is the only Karta who supervise the whole business. Karta may not be able to perform managerial skills efficiently. He may lack proper skills.

Unlimited Liability

The liability of Karta, that is the head of business, is unlimited. He is fully responsible for the affairs of business. His liability towards the business is unlimited. His liability is not only to the extent of his share.

Limited Membership

Membership of joint Hindu family business is not open to the public. Only the members of the joint Hindu family can become a member of business. Due to this, no fresh talent enters the business. Business also has limited financial source as it is dependent on its family members.

Uncertain Life

The life of Joint Hindu family business is uncertain. It is totally dependent upon good relations among its family members. If any clash & mistrust arises among family members the business may result in discontinuation. It is not always possible to maintain good relations among family members. 

No legal status

Joint Hindu family business is not controlled by business law or partnership act. These businesses are not registered, unlike other business. They are fully operated under Hindu law. The business & its members do not have any distinct identity.

Misuse of Power

The whole power of Joint Hindu family business lies in the hands of Karta. Full power is centralized in the hands of Karta. No other member can interfere in Karta decisions. Karta may misuse his power & take decisions according to his interest.

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