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Questions and Answers
What is the nature of liability of a sole proprietor?
What is the nature of liability of a sole proprietor?
In a sole proprietorship, who enjoys all the profits of the business?
In a sole proprietorship, who enjoys all the profits of the business?
What is one characteristic of a sole proprietorship in terms of its legal entity?
What is one characteristic of a sole proprietorship in terms of its legal entity?
What is one significant advantage of a sole proprietorship in terms of decision-making?
What is one significant advantage of a sole proprietorship in terms of decision-making?
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Which of the following is true regarding the formation of a sole proprietorship?
Which of the following is true regarding the formation of a sole proprietorship?
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Study Notes
Overview of Hindu Undivided Family (HUF) Business
- HUF business is a unique form of organization primarily found in India.
- It is owned and operated by members of a Hindu undivided family.
Key Roles and Responsibilities
- Karta: The eldest member (male or female) of the HUF, who manages and controls the business activities.
- The Karta has the authority to make all decisions related to the business.
Liability
- Karta's Liability: Unlimited liability; personally accountable for the debts and obligations of the business.
- Co-parceners' Liability: Limited liability, restricted to their share in the business.
Membership
- Minor members can also participate in the business as co-parceners.
Merits of HUF Business
- Effective Control: The Karta's management ensures streamlined decision-making and oversight.
- Continued Existence: The structure allows for ongoing business continuity, even with changes in member composition.
- Limited Liability for Co-parceners: Protects co-parceners by limiting their risk to their investment.
Limitations of HUF Business
- Limited Resources: The business often struggles with fewer financial and physical resources compared to larger entities.
- Unlimited Liability of Karta: Exposes the Karta to significant financial risks.
- Limited Managerial Skills: The Karta may lack expertise in all areas necessary for effective business operations.
Legal and Governance Aspects
- Governed by Hindu law, which defines the rights, responsibilities, and obligations of family members in business.
- The term "co-parceners" refers to HUF members who share ownership of the business and its assets.
Distinct Characteristics
- HUF businesses are characterized by their family-run structure and adherence to traditional practices.
- The head or Karta plays a pivotal role in harmonizing family relations while managing business interests.
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Description
Test your knowledge about the concept of Karta in Hindu Undivided Families (HUF), including their role, responsibilities, and liabilities. Learn about the control and management of HUF businesses and the involvement of minor members.
