14 January 2015
Steps involved in creation of HUFs –
1) Capital and members – For an HUF to be created the major requirements is 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. They don’t have to wait till they have a baby to constitute their HUF. 2) Select a suitable name – The 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 HUF should be embodied in a deed which provides that a proper legal deed or agreement is 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. It is also advisable to get some stationery printed for official communication. 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.
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