Legal Requirements for Formation of A Hindu Undivided Family (HUF)

 1) CAPITAL & MEMBERS : –
... For A HUF to be created , major requirements are the capital and persons. Capital can be in the form of ancestral property, assets gifted by relatives and friends, or received by the HUF through a will. The minimum no. of members required is two, who can be a husband and wife. Both the spouse can create a family and constitute a HUF.
2) SELECT A NAME :- –
A HUF to be created should have proper name. Select a proper name for the HUF and the name should not violate the laws or have any negative impact. The members can choose a suitable name before starting a HUF business form.

3) FORM A DEED :- –
Formation of A HUF should be embodied in a deed which provides that a proper legal deed or agreements are required before creating a HUF. The agreement / deed should have all the details, including the name of Karta, co-parceners, address and source of funds in the corpus. Deed will facilitate that the business or the formation of HUF is valid and true.

4) Apply for PAN :–
Application for PAN (Permanent Account Number) is also an important step to be undertaken while forming a HUF. After executing the deed, the Karta is required to obtain a permanent account number PAN for the HUF. Obtaining PAN is a mandatory requirement as all financial transactions shall carry PAN.

5) Open a Bank Account –
After PAN has been allotted, the Karta is required to open a Bank a/c in the name of the HUF. The HUF is now ready to function. The Karta will have to invest in tax saving instruments and file tax returns on behalf of the HUF. Only the money related to the business of HUF shall be invested in such Bank accounts.

FOLLOWING POINTS ARE EXTREMELY IMPORTANT :-

1) Karta – Karta is the person who manages the affairs of the family. It is not necessarily required that the senior most member should be the Karta of a HUF. Any other male member of the family can be the Karta with the consent of the other members of the family.
2) The HUF continues to exist in the hands of the female members after the death of the male member.
3) Adopted child can become the member but he cannot become the coparcener.
4) The daughter after her marriage ceases to be a member of her father’s HUF. After marriage she becomes the member of her husband’s HUF.
5) A widow cannot be the Karta of the HUF as she is not the coparcener.