Though a member of a joint Hindu family cannot constitute a firm, it is open to them to partition the joint family property or divide the business of family and then enter into a partnership in respect of the family business so divided among themselves or in respect of a new business. The business account of joint family business maintained by Karta or any adult member is different from partnership. Firstly, there is no individual account of profit and loss in a joint family, whereas in a partnership such account is maintained. Secondly, partnership is a contractual relationship which can be entered into between competent parties whereas a joint family is the result of status. Now it is fully recognised that Karta or an adult member of a joint Hindu family may enter into partnership with a stranger. The Karta or an adult member of the family acting within his rights can enter into partnership in such a manner as to make the entire joint family liable for the debts of partnership and also be entitled for the benefits thereof. Where any member of the joint family enters into partnership with a stranger, the other members of the family do not ipso facto become partners in the business so to clothe them with all the rights and obligations of a partner.
The undivided members of a joint family can enter into a contract between themselves. They can enter into a contract of partnership with the Karta also. In such partnership contract their contribution may be in the form of their skill, expertise or labour, which may fulfil the essential characteristics of partnership.