Question

Statement I: The capital of joint Hindu family business is limited to the ancestral property.

Statement II: The Karta of joint Hindu family business may not be competent to manage the business.

Options

• Both I and II are correct.

• Both I and II are wrong.

• Only I is correct.

• Only II is correct.

Answer 1

Both I and II are correct.

Explanation:

The capital of a joint Hindu family business is indeed limited to the ancestral property, as the family business primarily relies on inherited property, which restricts the availability of funds for expansion. Also, the Karta may not be competent to manage the business because they alone handle the management, often without professional specialization, which can limit managerial ability. Hence, limited capital and limited managerial ability are recognized disadvantages of this business form.