The following are the points of distinction between a partnership and joint Hindu family firms:-
(1) Family firm unlike partnership is not dissolved on the death of a coparcener.
ADVERTISEMENTS:
(2) A coparcencr is not entitled to ask for account on his leaving the coparcenary while a partner can.
(3) Only the manager has the power to contract debts and pledge the credit of family property for family business. In case of partnership any partner can bind other coparceners, by the debts incurred in the course of business.
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(4) The liability of the manager for debts incurred in business extends to his separate property as well while the other members are only liable to the extent of their interest in the family property unless they themselves are the contracting parties along with the manager. In the ordinary partnership the separate property of each partner is also liable for the partnership debts along with his share in the partnership property.
(5) The liability of minors both in an ordinary partnership and in a family business is limited to their interest in the partnership property or in the family property unless the partner accepts partnership on his attaining majority or the minor coparcencr ratifies the contract on attaining majority.
ADVERTISEMENTS:
If the family is trading family and the extended business is not more hazardous or speculative than the other previously existing it may not be regarded as a new business. It has been held that a manager of a joint family cannot impose upon the minor members of a joint family the risk the liability of a new business started to himself.
Even where the father is the manager, he is not entitled to mortgage the joint family property in order to provide money for one of his sons to start a new business. Such a mortgage is wholly invalid against minor coparceners. The same rule applies in the case of adult members if the new business is not started with their consent.
It was so held in Banaras Bank Ltd. v. Aari Narain [(1932) 54 Alld. 563: (1932) A.P.C. 182],
But where the new business is started by the sole surviving coparcener of Mitakshara family the above cited rule does not apply. Such business becomes from its origin a family business and the minor members born subsequently are not competent to say that the risk of the new business cannot be imposed on them. It was so held in Angenylal. Angneylal v. Angneylal (51) A.A. 400.