Hindu Undivided Family (HUF) Business — Meaning, Karta and Coparceners

A Hindu Undivided Family (HUF) business, also called a Joint Hindu Family business, is a form of business organisation found only in India. It does not arise out of any agreement between its members — unlike a partnership — but out of the operation of Hindu law itself. An HUF consists of all persons lineally descended from a common ancestor, together with their wives and unmarried daughters. When such a family carries on a business that has either come down to it as an ancestral business or has been built up with joint family funds, that business is an HUF business.

Membership by birth, not by agreement: this is the single most distinctive feature of an HUF business. A person becomes a member of the family — and therefore acquires an interest in its joint business — simply by being born into the family. No agreement, no admission process, and no purchase of a share is needed, unlike in a partnership (which needs an agreement) or a company (which needs shares to be subscribed for).

Coparceners: in most of India, including Tamil Nadu, HUF businesses are traditionally governed under the Mitakshara school of Hindu law, under which a son, grandson and great-grandson acquire, by birth itself, a right in the ancestral joint family property. Members who have this by-birth right are called Coparceners. (Following the Hindu Succession (Amendment) Act, 2005, daughters too are recognised as coparceners with an equal right by birth — a change from the older position where only male descendants held this status.)

The Karta: the business of an HUF is managed by its senior-most member, called the Karta. His authority to manage the business, borrow on its behalf, and represent the family in dealings with outsiders comes not from any agreement among the coparceners, but from his position as head of the family under Hindu law itself — subject, of course, to certain restrictions on alienating joint family property without proper justification.