Why is HUF not considered as a partnership?

By | June 13, 2023


Why is HUF not considered as a partnership

Business structure, An Hindu Undivided Family is distinguish from a partnership by its unique legal nature and structure, rendering it a distinct entity.

Here are a few reasons why HUF is not categorize as a partnership

Formation:

A partnership is form by an agreement between two or more individuals or entities to carry on a business together and share profits and losses. On the other hand, an HUF is form by the operation of Hindu law and is automatically create when a Hindu family comes together as a joint family unit. Legal entity:

Legal Entity:

A partnership is a separate legal entity from its partners, while an HUF is not consider a distinct legal entity. The HUF is seen as an extension of the joint family and comprises the family members and their ancestral property.

Liability:

In a partnership, the partners have unlimited liability, meaning they are personally responsible for the debts and obligations of the partnership. In the case of an HUF, the liability is ltd to the extent of the joint family property.

And individual family members are not personally liable for the HUF’s debts.

Management:

In a partnership, the partners actively participate in the management and decision-making of the business. In an HUF, the Karta, who is typically the eldest male member of the family, manages the affairs of the HUF and makes decisions on behalf of the family.

Dissolution:

Partnership can be dissolve by mutual agreement, expiration of the partnership term, or other specified events mentioned in the partnership agreement. On the other hand, an HUF continues to exist until it is legally partition or ceases to have any joint family property.

 

It’s important to note that the laws and regulations governing partnerships and HUFs may vary in different jurisdictions. It’s always advisable to consult with a legal professional or seek advice from a qualified expert.

To understand the specific legal implications and differences in your jurisdiction.

 

FAQs

1. Why is HUF not consider a partnership?

Ans: HUF is a family unit create by law, whereas a partnership is a voluntary agreement between individuals to carry on a business for profit.

2. Do HUF members voluntarily form the entity?

Ans: No, an HUF is form by birth within a Hindu family, while partnerships are form by agreement between individuals.

3. Can HUF have partners?

Ans: No, an HUF consists of family members, called coparceners, and there are no “partners” as in a partnership firm.

4. Is there an agreement in HUF like in partnerships?

Ans: No, HUF is govern by Hindu law, and there is no partnership agreement required for its formation.

5. Who manages an HUF?

Ans: The HUF is manage by the Karta, the head of the family, unlike a partnership where management is based on mutual agreement between partners.

6. Can an HUF dissolve like a partnership?

Ans: An HUF cannot be dissolve by agreement; it only dissolves on partition or if all members die. Partnerships can dissolve through mutual consent or legal means.

7. How are profits distribute in HUF vs. partnership?

Ans: In HUF, income is share among all members according to family law, while in a partnership, profits are divide based on the partnership agreement.

8. Is an HUF create for business purposes like a partnership?

Ans: No, an HUF is a family entity and may or may not engage in business, while partnerships are formed specifically for business activities.

For more information visit this site: https://www.mca.gov.in

 

Remuneration to Partners as Representative of HUF Allowed u/s 40(b) - Faceless Compliance

 

 

For further details access our website https://vibrantfinserv.com

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