Hindu Undivided Family

Hindu Undivided Family - Process, Procedure, Document Required, Fees, Eligibility, Duration

A HUF can be established by a family. It is made up of the 'Karta,' or eldest or head of the family. The 'karta' is in charge of the day-to-day operations of the HUF. Coparceners are the other members of the family involved in this type of business. The family business can be dissolved by a partition if all members agree. Assets will be distributed to members following the partition.

Features of HUF

• The Hindu Undivided Family is also known as a family. HUF is a legal entity in which the business and the people are separate entities.
• The Hindu Undivided Family is governed by Hindu law.
• The 'karta,' who makes all major decisions, governs the HUF.
• After the death of the common ancestor, including the 'karta,' the business survives. The family's next eldest member becomes the 'karta'.
• The HUF exists even after all of the male members have died.
• Although Jain and Sikh families are not subject to Hindu law, they are permitted to form HUFs.
• HUF members include men and women, as well as children.

Pros of HUF

• The HUF is entitled to tax deductions and exemptions because it is taxed separately from its members.
• The HUF's revenue from assets and enterprises is assessed separately. The family's tax liability is reduced as a result.
• The existence of a HUF is indefinite. Even the death or retirement of one of the members, or the 'karta' himself, has no impact on the operation of the business.
• Except for the 'karta,' the liabilities of all other members of the HUF are limited to their portion of the property only.
• There are no legal formalities to deal with when forming a HUF.

Cons of HUF

• The HUF members have equal access to the property. The property cannot be sold unless all of the members agree.
• The liability of the ‘karta’ is infinite. In the event of bankruptcy, Karta's personal property can be used to repay the business debt.
• The HUF consists solely of family members with limited resources. With limited capital, HUF's chances of expansion are slim, limiting its scope of operations.
• When a HUF dissolves, its assets are distributed among its members, which can lead to a slew of disagreements and legal wrangling.