Q.Distinguish between a Joint Hindu family business and partnership.

Key distinctions:

• Formation: HUF — by birth, governed by Hindu Law, no agreement; Partnership — by agreement, governed by the Partnership Act, 1932.
• Members: HUF — up to three generations, minors included by birth; Partnership — minimum two, minor only admitted to benefits.
• Liability: HUF — only the karta has unlimited liability; Partnership — all partners have unlimited (joint and several) liability.
• Control: HUF — with the karta alone; Partnership — shared by mutual consent. …

The two forms differ across every major dimension because one is founded on family membership by birth and the other on a legal contract among persons.

Basis of formation

• Joint Hindu Family business: Comes into existence by birth into a Hindu Undivided Family; it needs at least two members and ancestral property, requires no agreement, and is governed by Hindu Law (the Hindu Succession Act, 1956).
• Partnership: Comes into existence through a legal agreement among the partners and is governed by the Indian Partnership Act, 1932. The business must be lawful and run for profit.

Members and minors

• HUF: Membership is by birth; up to three successive generations can be members, and even minors are full members (co-parceners) by birth.
• Partnership: Requires a minimum of two partners (present maximum 50). A minor cannot be a full partner and can only be admitted to the benefits of the firm with the consent of all partners.

Liability

• HUF: All members except the karta have limited liability (limited to their share in the co-parcenary property); the karta alone has unlimited liability.
• Partnership: All partners have unlimited liability, which is joint and several — personal assets can be used, and one partner may have to pay the whole debt.

Control and management

• HUF: Control rests entirely with the karta (the eldest member), whose decisions are binding on the other members.
• Partnership: Control and decision-making are shared by the partners, generally acting by mutual consent (with mutual agency — each partner can bind the others).

Continuity

• HUF: The business continues even after the death of the karta or a member, as the next eldest becomes karta — giving it stability. It can be ended by the mutual consent of members. …