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What is Joint Hindu Family business and what are the limitation on this type of business?

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What is Joint Hindu Family business and what are the limitation on this type of business?
posted Apr 6, 2016 by Anita Yadav

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Joint Hindu Family Business is a different type of organization, which is found only in India. As the name suggests, it is type of organization in which all the members of Hindu Undivided Family manage and control the business with the direction of head of the family. It is not a Partnership. It is just like a Partnership where only the members of the family can take part. It is not even sole trading concern, but it is enlargement of sole trading concern in which continuity is guaranteed.

Limitations of Joint Hindu Family Firm:
1. Disproportionate relationship between work and reward: The relationship between the works and reward is not positively proportionate. The profit of the family business is divided among all the members, whereas the Karta is the only earner.
2. Limitations of management: Like sole proprietor, the Karta may not be possessing all the management skills required in the fields of production or purchasing, marketing, personnel and industrial relations, financing, and other enterprise functions. These limitations of management reflect in the efficiency and effectiveness of business operations.
3. Short life of business: The life of the family business is shortened if family quarrels take precedence over business interests.
Suitability of Joint Hindu Family Firm:
(i) Where investment required is moderate
(ii) Where application of personal skill and judgement is necessary like services.
(iii) Where avoidance of risky business due to unlimited liability of business is given precedence.
(iv) Normally found in small manufacturing, trading and services.

answer Jul 11, 2017 by Anurag Kashyap