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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.
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.
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.
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.
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.
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 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.
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.
Joint Hindu Famil y Business are confined to a limited local area because of limited
capital and limited business skill.
13.
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.
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.
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.
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.
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.
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2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
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.
2.
3.
4.
5.
6.
7.
8.
Family Disputes:
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.
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.
Generates Inefficiency:
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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
Meaning:
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
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(d) Ownership:
There is joint ownership of business
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)
It lacks continuity
(g) Number of members:
There is no limit on the number of members in a Joint Hindu Family Business
Profit Sharing:
Profit and losses of the business are share d amongst the co parceners
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Disputes:
There are no disputes as the sole trader is the sole owner of th e business
(k)
Specilisation: