Differences between Partnership and HUF Business

The main points of differences between a partnership and HUF business are as follows.

1. Basis of formation

A partnership arises out of a contract between partners. Whereas an HUF arises by the operation of Hindu Law. It is created by status or birth in the family, no agreement is needed for it.

2. Regulating law

A partnership is governed by the provisions of the Indian Partnership Act, 1932. An HUF business is governed by Hindu Law Succession Act.

3. Number of members

In a partnership business, the number of members cannot exceed 20 in case of non-banking business and 10 in case of banking business. But there is no such ceiling on the number of members (coparceners) in HUF.

4. Admission of new members

No new partner can be admitted to the existing partnership without the consent of all the other partners. In case of HUF firm, a person becomes a member (coparcener) merely by his birth.

5. Minor member

A minor cannot become a full-fledged partner in a firm; he can be admitted only to the benefits of partnership. In an HUF, a male child becomes a full-fledged member by birth.

6. Rights of females

In a partnership, women can become partners and they enjoy the same rights and privileges, as do male partners. In case of an HUF business, on the other hand, the membership is restricted to male members only. However, as per Hindu Law Succession Act,1956, a female relative of a deceased male member gets a coparcenery interest in the event of his death.

7. Implied agency

In a partnership, every partner has implied authority to represent the firm and bind the other partners by his acts. In HUF this right rests with the Karta only, other members may be allowed by Karta expressly or impliedly to contract debts on behalf of the firm.

8. Liability of members

In a partnership, the liability of all the partners is unlimited. Every partner is jointly and severally liable to third parties for the full debts of the firm. Whereas in case of HUF, liability of each member, except the Karta, is limited to the extent of his share in the property of the family.

9. Right to accounts

Each partner not only enjoys a right to inspect the books of account of the firm and demand a copy thereof, he can even demand the accounts of the past dealings. But a coparcener has no right to ask for the accounts of past dealings. He can ask for the position of the existing assets only.

10. Mode of dissolution

A partnership firm is dissolved on the insolvency or death of a partner. But the death, lunacy or insolvency of a coparcener does not affect an HUF. It continues to operate even after the death of a coparcener.