Features of a Joint Hindu Family Business
The Joint Hindu Family (JHF) business is a unique form of organization found only in India, governed by the Hindu Succession Act, 1956. The business is managed by the eldest male member, the ‘Karta’, while other family members are known as ‘co-parceners’.
Key Characteristics
1. Joint Ownership
The business is collectively owned by all co-parceners of the family. Membership is acquired by birth, and up to three successive generations can inherit a share in the business.
2. Limited Liability of Co-parceners
The liability of the co-parceners is limited to the extent of their individual share in the family's business property. Their personal assets are not at risk for business debts.
3. Unlimited Liability of Karta
As the sole decision-maker and head of the family, the Karta's liability is unlimited. He is personally responsible for all business debts, and his personal assets can be used to clear them.
4. Minimum Government Control
This business form faces fewer legal formalities and regulations compared to companies. The Karta can start or close the business with minimal governmental interference.
5. Business Secrecy
A JHF business is not required to publish its accounts or financial data. This allows for a high degree of privacy and confidentiality regarding business operations and strategy.
6. Flexibility
The Karta has the authority to make adaptive changes to the business. He can expand, diversify, or even shut down operations as per the demands of the market without lengthy procedures.
7. Quick Decision Making
Centralized authority in the hands of the Karta enables swift and decisive action. Decisions can be made instantly, with or without consulting the co-parceners, providing a competitive edge.
8. Absence of Separate Legal Status
The business is not considered a separate legal entity from its owners. The organization is identified by its members and is governed by Hindu Law rather than corporate law.