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The Most Popular Types of Company Registration in Indonesia

Indonesia’s economy has been growing steadily since the turn of the millennia. As recently as 2018, Indonesia’s GDP reached an all-time high of 1,042.17 USD billion. To further increase its economic growth, the Indonesian government has taken measures to encourage business activities by continuing deregulation and reducing bureaucracy.

With such measures in place, it is easier for you to start your business and register your business entity in the country. There are several types of legal entities that foreign or domestic business owners can set up a company in Indonesia. If you’re looking to set up a business entity, it’s best to understand the differences between these entities and its requirements, benefits, and drawbacks.

There are three forms of privately owned entities:

1. Firma;
2. Commanditaire Vennootschap (CV);
3. Perseroan Terbatas (PT);
–  Penanaman Modal Dalam Negeri (PT PMDN);
–  Penanaman Modal Asing (PT PMA).

Aside from the business entities above, Indonesian law also regulates non-profit organizations. Yayasan, also known as a foundation in Indonesia, is a form of entity that one needs to set up to legally operate in social, religious, and humanitarian fields in Indonesia.


1.  Firma

Firma is a type of cooperative business entity formed by two or more Indonesian citizens in one agreement to make a collective name to deal with third parties in making a profit.

Advantage

     Disadvantages

Responsibilities are not limited for different partners. Each partner has the right to lead and have the authority to represent the company and make decisions

  • As Firma is established between partners that have equal authority, internal conflict among partners can threaten the management and survival of the company.
  • Firma is not a legal entity, thus there is no separation between personal wealth and company assets.
  • Each Firma partner is responsible for paying off the unpaid debt with their personal property.

2.  Commanditaire Vennootschap (CV)

The CV is an enterprise that is established by two or more persons as partners. There are two types of partners: active partners, that provide capital as well as run the business, and silent partners, that only provides capital.

Advantage

     Disadvantages

CV is the easiest entity to establish. While the minimum
deposit for PT is 50 million, In setting up a CV, you do not have to have the minimum capital and can remain operating.
  • A CV is not a legal entity, it does not have its own wealth, which can be a drawback for partners.
  • It is difficult to withdraw deposited capital

 

3.  Perseroan Terbatas (PT)

PT is the most common business entity. Its capital is divided into stocks (shares). The responsibility for liabilities/debt for the company is limited to the owners of holdings. There are two types of PT; a locally owned PT called PT Penanaman Modal Dalam Negeri (PT PMDN) and a foreign-owned PT called PT Penanaman Modal Asing (PT PMA).

– PT PMDN

It is further divided into three categories based on the projected investment value:
1. Small companies (Rp 50 million).
2. Medium-sized companies (Rp 500 million).
3. Large companies (Rp 10 billion).

     Advantage

      Disadvantages

  • While PT PMA requires an investment plan for at least Rp 10 billion, PT PMDN allows more flexibility on investment value.
  • PT PMDN companies are allowed to operate a wider variety of business activities than foreign-owned companies.
  • PT PMDN has to be 100% locally owned, which means foreign shareholders are not allowed.
  • Small and medium-sized companies registered under PT PMDN are not allowed to apply for work permits for foreign workers.

 

-PT PMA

PT PMA is the standard way for foreign investors to operate a company in Indonesia. This entity can be owned 100% or partially by foreign investors depends on its business field.

     Advantage

      Disadvantages

  • PT PMA allows businesses to receive foreign investment opportunities which are restricted in PT PMDN registration
  • PT PMA is restricted to operate on business sectors listed under Negative
    Investment List, a document that regulates foreign ownership of businesses based on the business sectors they operate in.
  • PT PMA is required to have an investment plan valued at minimum IDR 10 billion.

 

Yayasan (Foundation)

Yayasan, also known as a foundation in Indonesia, is a form of non-profit organizations. It is required to legally operate in social, religious, and humanitarian fields in Indonesia. Foundation is the only type of not-for-profit organization which can be founded by foreigners.

The organizational structure of a foundation must consist of three bodies:

1. The Governing Board (Badan Pembina);
2. Supervisory Board (Badan Pengawas);
3. Executive Board (Badan Pengurus).

Yayasan is a legal entity that owns its own assets. In the event a Yayasan is liquidated, any remaining assets of the Yayasan must be transferred to another Yayasan that have the same purpose and objective of the liquidated Yayasan.

Benefits

Yayasan are generally subject to income tax on the same basis as other legal entities. However, there are exceptions. Income is tax-exempt in case:

  • Foundation uses income to provide scholarship funds.
  • Income of a foundation working in the area of education or research and development that is re-invested in its work.

Limitation

  • Yayasan are not allowed to distribute or transfer (directly or indirectly) its assets (including cash, goods or other) among the members of the boards, the employees or any third parties.
  • Members of the Governing Board, Supervisory Board, or Executive Board are required to be a volunteer. This means you are prohibited from benefits and will not receive salary, wages or honoraria.

 

Which Option to Choose?

In conclusion, these few options have very different benefits and considerations depending on your needs. Therefore, we advise that you connect with professional consultants to help evaluate your options and choose the best one that fits your business goals in Indonesia.

On that note, Indoned Consultancy has experience in handling all processes related to local company, foreign company, and representative office registration. We’re happy to help you start incorporating your business in Indonesia.

Source : https://greenhouse.co-www.xendit.co-www.bizlatinhub.com

Disclaimer:

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.

 

 

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