When opening a new company in Indonesia, it is important to know what types of organizations are available to entrepreneurs, consider their characteristics, and meet their requirements.
Commercial organizations available in Indonesia include:
- Perseroan Terbatas (PT) - Limited Liability Company
- Private-owned enterprises (BUMS) - Sole Proprietorship
- Sole proprietorship (UD) - Sole Ownership
- Representative office - Representative Office
- Subsidiary company - Subsidiary Company
- Perseroan Terbatas (PT) – Limited Liability Company
1.Perseroan Terbatas (PT) is a limited liability company. PT is a legal entity with its capital divided into shares.
The personal assets of the owner are protected if the company encounters financial difficulties because the obligations of the shareholder are limited to the number of unpaid shares in the company's capital. Shares can be easily sold, and ownership and shares can be transferred without dissolving the company.
In Indonesia, there are two types of PT companies:
- Local PT Company
- Foreign PT PMA Company
Local PT Companies
Local PT companies can be 100% owned by Indonesian citizens. However, if a foreigner wants to establish such a type of business, they will need
Local nominal shareholders are intended for foreign investors who want to expand their business in sectors that are not open to foreigners. Local nominal shareholders allow foreigners to start a business in any industry they desire.
Key requirements for establishing a local PT company include:
- One local director
- Two local shareholders
- One local commissioner
The sizes of local PT companies in Indonesia are determined based on the amount of invested capital:
- Small: 1 million - 1 billion Indonesian Rupiah
- Medium: 1 billion - 10 billion Indonesian Rupiah
- Large: More than 10 billion Indonesian Rupiah
Foreign-owned PT PMA Companies
PT PMA companies with foreign ownership allow for 100% foreign ownership and do not require the presence of a local shareholder, provided that their sector is not listed in the negative investment list.
If their sector is listed in the negative investment list, there is a rule that the foreign-owned company must follow, and it may require a joint venture with Indonesian individuals or legal entities to conduct business in Indonesia legally.
Minimum requirements for a foreign-owned capital company (PT PMA) include:
- Two foreign individuals or legal entities or a combination with local shareholders.
- At least one local director.
- One foreign or local commissioner.
The minimum capital investment must be at least 10 billion Indonesian Rupiah. To confirm the payment of the company's capital, the following is required:
- A photocopy of the deposit receipt or a bank statement in the name of PT or a joint account in the name of the founders, or an original letter of statement of the paid-up capital in PT, signed by all members of the Board of Directors together with all the founders and all members of the Board of Commissioners if the paid-up capital is in monetary form.
- An original assessment certificate from an independent appraiser or evidence of goods purchase if the capital contribution is in a form other than cash, accompanied by proof of announcement in a newspaper if the capital contribution is in the form of real estate.
- A photocopy of the government decree and/or the decree of the minister of finance for a limited liability company or a regional decree if the founder is a regional company or a provincial/regency/city government, or a photocopy of the consolidated PT balance sheet or the balance sheet of a company that is not a legal entity included in the paid-up capital.
The original letter of statement of the paid-up capital in PT, signed by all members of the Board of Directors together with all the founders and all members of the Board of Commissioners, is notarized and is typically provided by visa agencies for clients to sign because in most cases, clients cannot provide 10 billion at once.
2. Private Enterprises (BUM)
Private enterprises, or BUMs, can be divided into three types:
- Firma (FA) - Firm
- Commanditaire Vennootschap (CV) - Limited Liability Partnership
- Perseroan Terbatas (PT) - Limited Liability Company
Firma (FA) - Firm
Firma (FA) is a form of a private company that can be established by two or more Indonesian individuals. Firma is not a separate legal entity from its owners; therefore, there is no protection of personal assets or company assets. If the company incurs debts, the partners will be personally responsible for repaying the debt with their personal property. Each partner has equal authority to manage the company and make decisions, and their duties are not limited for different partners.
Key requirements for FA:
- Must have a minimum of two founders of the company.
- Must have purposes and objectives that do not contradict Indonesian laws and regulations.
- Must have a trade name.
- Must have a place of business.
- Management is appointed by the founders.
Commanditaire Vennootschap (CV) - Limited Liability Partnership
There are two types of partners in CV:
- Active partners who provide capital and engage in the business.
- Passive partners who only provide capital.
CV does not require a minimum capital, and it is one of the simplest forms of organizations. However, CV is not a separate legal entity and does not protect the personal assets of the partners.
Requirements for creating CV:
- Minimum of two individuals acting as founders of the company.
- Founders must be Indonesian citizens.
- Notarial deed in the Indonesian language.
- 100% local ownership.
3. Usaha Dagang (UD) - Sole Proprietorship
Usaha Dagang (UD), or sole proprietorship, is the simplest form of company in Indonesia, as it only requires one person to operate the business. There is no legal distinction between the owner and the individual entrepreneur.
To open a UD, you need:
- A company name.
- An employee identification number.
- A letter of permanent residence.
- A business license.
4. Representative Office
A representative office in Indonesia is suitable for foreign companies that want to explore the Indonesian market. Representative offices can only conduct market research, advertising activities, and act as agents for the purchase or sale on behalf of the foreign parent company. The license for this type of company expires after two years and needs to be renewed to continue business activities in Indonesia.
The office should not generate profits in Indonesia, and all commercial operations must be managed by the foreign parent company. Unlike other foreign capital companies in Indonesia, there is no minimum capital requirement for representative offices. Representative offices also allow for the employment of both local and foreign employees.
There are three types of representative offices in Indonesia:
- Foreign Representative Office
- Foreign Construction Representative Office
- Foreign Trade Representative Office
Foreign Representative Office
- Acting as a manager, coordinator, and representative for the company's interests in Indonesia or abroad.
- Abstaining from profit-generating activities, entering into contracts, and purchasing goods or services from local companies.
- Not engaging in other forms of company present in Indonesia.
Foreign Construction Representative Office
- Construction services.
- Undertaking high-risk, high-technology, or high-cost construction projects through collaboration.
- Conducting construction work with the permission of the Foreign Construction Representative Office.
Foreign Trade Representative Office
- Representing, promoting, and improving the marketing of products produced by foreign companies.
- Providing information or instructions on the use and import of company products to users.
- Conducting market research and overseeing product sales promotion in Indonesia.
- Entering into contracts with Indonesian companies on behalf of the parent company.
5. Subsidiary Company
Subsidiary companies in Indonesia are established as limited liability companies, and if the parent company is a foreign company, the most suitable type would be a foreign capital company (PT PMA). Subsidiary companies are separate legal entities.
Business owners create a subsidiary company to gain access to the Indonesian market. It is also considered a tax resident.