Business Entities and Company Registration in Indonesia
Starting a new business in Indonesia will be easier if you have known about the legality of its business from the beginning. Business legality is used to protect and ensure the existence of a business. This is also a sign that the integrity of the business has been proved. In fact, besides any other important aspects before establishing a business in Indonesia, fulfillment of the legal aspect is one of the main considerations for the investors. Here glance information about Business Entities and Company Registration in Indonesia.
There are several forms of business entity, such as sole proprietorship, firm, CV, limited liability company (PT), and so on. Most business entities in Indonesia is in the form of a limited liability company (PT).
The Limited Liability Company is a legal entity to run a business that has capital consisting of shares, whose owners have shared as much as shares they owned in the PT. Thus, the advantages of establishing a PT such as:
|1.||The PT name registered is protected by the country and its law;|
|2.||There is a separation between personal assets and company assets;|
|3.||The shareholders of PT are liable up to the amount of their investments in the company;|
|4.||PT is a legal entity which has a separate legal personality from its shareholders.
In addition, PT can hold a right over land named “Hak Guna Bangunan”;
|5.||PT can be a sponsor for its foreign employees in reference to KITAS (resident permit in Indonesia) application terms and conditions apply;|
|6.||The process of PT Establishment is hassle-free.|
Generally, PT can be classified into 2 types based on their investors and capitals, such as:
1. PT PMDN (Local Company) in Indonesia
Domestic investment in Indonesia is an investment activity to conduct business in the territory of the Republic of Indonesia which is carried out by domestic investors using domestic capital. In most cases,
a domestic investment can be done in the form of a business entity such as a legal entity, not a legal entity, or an individual business. However, PT PMDN is one of the common legal entities that provide you the advantages as stated in the advantage of PT.
More details about the PT PMDN, as follows:
PT PMDN (local company) is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by domestic investors using domestic capital. (Article 1 number 2 of Act Number 25 Year 2007 regarding Capital Investment).
- The Capital Requirement
There is no minimum capital requirement for establishing a local company, this is according to the Government Regulation Number 29 Year 2016 concerning The Changes of Capital Requirement of Limited Liability.
- Business Field
PT PMDN can engage in any business fields in the Indonesian Standard Industrial Classification in the Regulation of the Head of the Central Statistic Number 19 year 2017, except those are listed in Appendix 1 of the Presidential Regulation No. 44 of 2016. Such business fields can be classified into two categories, namely the open business fields and the business fields conditionally open (subject to certain requirements).
- Sponsor for KITAS
There are certain conditions for PT PMDN to eligible to be a sponsor of the KITAS application. Contact us Indoned Consultancy to find out the detail information.
2. PT PMA (Foreign Direct Investment Company) in Indonesia
The provisions of Article 5 paragraph (2) of Act Number 25 Year 2007 concerning Investment which states that foreign investment in Indonesia is required in the form of Limited Liability Companies unless the law stipulates otherwise.
More details about PT PMA, as follows:
Foreign Direct Investment is an activity of investing to conduct business in the territory of the Republic of Indonesia conducted by foreign investors, either by using foreign capital fully or in conjunction with domestic investors (Article 1 number 3 of Act Number 25 Year 2007 regarding Capital Investment).
- The Capital Requirement
The minimum authorized capital requirement for PT PMA is IDR 10.000.000.000,00 (ten billion rupiah) exclude land and building, the paid-up capital must at least IDR 2,500,000,000.00 (two billion five hundred million rupiah) or 25% from the total authorized capital. Since a PMA is qualified as a large business unless determined otherwise by regulation, therefore it must implement the provisions, investment value and capital requirements to obtain an Investment Licensing.
- Business Fields
PT PMA is only allowed to engage in these following business fields:
»Business fields that are not listed in Negative List Investment. Indonesia uses a “negative list” approach. Therefore, business fields that are not listed in Negative List Investment are 100% open for foreign investment.
»The business field which conditionally open for foreign investors with a certain percentage of foreign ownership in the negative list investment.
- Sponsor for KITAS
Every PT PMA that has been officially registered can be a sponsor for the KITAS application.
The following documents and permits are generally processed for the first stage of PT PMA establishment, such as:
|1.||Deed of Establishment,|
|2.||Legalization from the Ministry of Law and Human Rights,|
|3.||Taxpayer of Identification Number,|
|4.||OSS account and obtaining licenses related,|
|5.||Company Domicile Ceritificate from the local authority (Depends on the area the company is located).|
Set Up Company With Indoned Consultancy
Starting a business or legal entity in Indonesia is a good thing by looking at how Indonesia’s potential in terms of business opportunities. With so many areas that have great business opportunities in Indonesia, Indonesia has given its own interest for entrepreneurs to invest, for both local and foreigners.
As mentioned before, there are various ways for an investor to set up a business in Indonesia, depending on the investor‘s type of business. However, we will recommend the most popular one based on our experiences, namely PT PMA and PT PMDN.
The duration of establishing a PT PMA or PMDN is on average 20 to 40 working days according to the completion of your document requirements. Occasionally, a PT PMDN can be processed faster, but this legal form can only be used by Indonesian companies or persons. Therefore, we advise you to establish a PT PMA and you have to be sure that you own all the required licenses, if you cooperate with a local company or local persons.
Indoned Consultancy always informs you about the documents and licenses that your company needs, so you can start on a legal and fast way. Do not hesitate to contact us if you need our assistance concerning doing business in Indonesia. Let us, Indoned Consultancy, assist you through every process of establishing a business entity in Indonesia. It is possible to start your own company and make your own decisions soon.
The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.