"Disadvantages Of Joint Hindu Family Business"

                    A business, which continues from one generation tom another generation is known as joint Hindu family business or firm. This is special form of business organization, which now exists only in India. And the business is with in the family. The head of the family is the head of the business also. He is known as “karta” and the members are known as “co- parceners”. Joint Hindu Family is governed by the Mitaksara Law.

There are many disadvantages of the Joint Hindu Family Business In India. 

       Disadvantages of The Joint Hindu Family Business

1. Limited Capital
2. Unlimited liability of Karta
3. Lack of stability
4. Less motivation
5. Limited Growth and Expansion
6. No entry for non family members
7. No Legal Status

 1. Limited Capital: -This type of business does suffer from the limitation of capital. This is because the business has to depend upon the savings of the family. Again, limited amount of borrowings is possible from friends, banks and others.

2.  Unlimited liability of Karta: -The liability of the karta is unlimited but the liability of co-parceners is limited. The karta is liable to pay the dues even from his personnel property. Unlimited liability makes him more cautions and he may not take any risk.

3.  Lack of stability: -The continuity and stability of the firm depends upon good relations among the family member’s but in practice it is not possible. Therefore there may be results in the discontinuation of the firm. However in many case there is continuity of business.

  

4.  Less motivation: -All the members of the family are entitled to equal share whether they put in work or not. There is no relation between efforts and rewards. Hence, there is less motivation to put in more effort.

5.  Limited Growth and Expansion: -The investment of the joint Hindu family business is limited. Growth and expands is possible only when there is large investment. But the liability of the Karta is unlimited. Hence, there is less scope for Growth and expansion.

6.  No entry for non family members: -Only family members can get entry into the business. Outsiders are not allowed to interfere in the family business. So there is less scope for increasing the capital of family members.

7.  No Legal Status: -Like Sole trading concern, the Joint Hindu family business lacks legal status. The registration of this type of business is not compulsory. The members and the firm do not have separate entity.