Navigating company registration in Indonesia is essential for both local and foreign investors. Indonesia, with its strategic location and dynamic economy, offers various business entities to suit different needs. This article provides an overview of these entities, including Limited Liability Companies (PT), Foreign Investment Companies (PT PMA), Representative Offices (KPPA), Branch Offices, Public Companies (Tbk), Sole Proprietorships (UD), Partnerships (CV), Cooperatives (Koperasi), Foundations (Yayasan), and Non-Profit Organizations.
Understanding the various types of companies in Indonesia is essential for anyone wanting to start a business. Indonesia offers various business structures, each with its benefits and requirements. This guide will walk you through the types of companies available in Indonesia, their advantages, and the steps needed to set up each type.
Overview of Company Registration in Indonesia
Company registration in Indonesia involves several legal and administrative steps. The country offers a range of business entities to cater to both local and foreign investors. From Limited Liability Companies to Sole Proprietorships, each type has specific regulations and benefits. Understanding these options can help you choose the most suitable structure for your business.
To understand who can owned each types of the legal entity, either by Indonesian or foreigners, please see our matrix below:
| No | Type of Company | Indonesian | Foreigner |
| 1 | Limited Liability Company (PT) and/or Foreign Investment Company (PT PMA) | v | v |
| 2 | Representative Office | x | v |
| 3 | Branch Office | v | v |
| 4 | Public Company (tbk) | v | v |
| 5 | Sole Proprietorship (UD) | v | x |
| 6 | Partnership (CV) | v | x |
| 7 | Cooperative (Koperasi) | v | x |
| 8 | Foundation (Yayasan) | v | v |
| 9 | Non-Profit Organizations | v | v |
Limited Liability Company (PT)
A Limited Liability Company, known as “Perseroan Terbatas” (PT) in Indonesia, is the most common type of business entity.
Benefits of PT
A PT offers liability protection for its shareholders, separating personal assets from business liabilities. It also provides credibility and easier access to capital.
Steps to Register a PT
- Name Reservation: Choose a unique company name.
- Deed of Establishment: Draft and notarize the company’s Articles of Association.
- Approval from Ministry of Law and Human Rights: Submit the deed for approval.
- Tax Registration: Obtain a Tax Identification Number (NPWP).
- Business License: Secure necessary business licenses and permits (NIB – Business Identification Numbers or certificate standards).
- Opening a corporate bank account
Foreign Investment Company (PT PMA)
PT PMA (Penanaman Modal Asing) is just the same as the PT as written above. It is added with the PMA to tailor its purpose to foreign investors who invest as the shareholders in a PT. While a PT who is fully owned by Indonesian does not have a minimum capital, the establishment of PT PMA requires minimum paid up capital in the amount of IDR 10 billion or equals around USD 650,000.
Advantages of PT PMA
PT PMAs allow up to 100% foreign ownership and can engage in a wide range of business activities.
Registration Process for PT PMA
The registration process is the same as PT as above.
Representative Office
A representative office allows foreign companies to establish a presence in Indonesia on behalf of a parent company established under foreign law.
Benefits of Establishing a RO
Depending on the type of RO, the establishment of RO does not require minimum capital (unlike PT PMA), so that you can test the market, conduct market research, liaison activities, and promote the parent company’s products.
Requirements and Registration for RO
- Legalization process to verify the existence of the foreign company abroad.
- Approval from BKPM: Secure approval to establish a RO.
- Obtain NPWP and Tax Registry under the RO’s name
- Open a bank account
Branch Office
A branch office is a branch from the PT or PT PMA that has been set up. Under the branch office, you can appoint the head of the branch formally and even separate the tax ID from the headquarters PT or PT PMA.
Pros of a Branch Office
Branch offices can engage in commercial activities, sign contracts, generate revenue directly, andsSeparating the tax matters so that you can continuously check whether the branch business is well performed or not.
How to Set Up a Branch Office
- Find the location and the address
- Appoint a head of branch office
- Create deed of branch office
- Apply for tax ID and tax registry of branch office
Public Company (Tbk)
A Public Company, or “Terbuka” (Tbk), is a company whose shares are publicly traded in IDX (Indonesia Stock Exchange).
Why Choose a Public Company
Public companies can raise capital by issuing shares to the public, providing greater funding opportunities.
Procedure for Registering a Public Company
- Initial Public Offering (IPO): Prepare for and conduct an IPO.
- Regulatory Approval: Obtain approval from the Financial Services Authority (OJK).
- Stock Exchange Listing: List the company’s shares on the Indonesia Stock Exchange (IDX).
Sole Proprietorship (UD)
A Sole Proprietorship, or “Usaha Dagang” (UD), is a business owned and operated by a single individual.
Advantages of Sole Proprietorship
Sole proprietorships are easy to set up and manage, with minimal regulatory requirements.
How to Register a Sole Proprietorship
- Deed of Establishment of UD
- Business License: Obtain a local business license.
Partnership (CV)
A Commanditaire Vennootschap (CV) is a partnership where the partners are liable for the company’s debts.
Benefits of Partnership
Partnerships offer shared responsibility and resources, making them suitable for small and medium enterprises.
Steps to Register a Partnership
- Name Reservation: Choose a unique company name.
- Deed of Establishment: Draft and notarize the company’s Articles of Association.
- Approval from Ministry of Law and Human Rights: Submit the deed for approval.
- Tax Registration: Obtain a Tax Identification Number (NPWP).
- Business License: Secure necessary business licenses and permits (NIB – Business Identification Numbers or certificate standards).
- Opening a bank account
Cooperative (Koperasi)
A Cooperative, or “Koperasi,” is a business entity owned and operated by its members for mutual benefit.
Why Form a Cooperative
Cooperatives promote economic democracy and member participation, offering benefits such as shared profits and decision-making.
Registration Process for Cooperatives
- Member Meeting: Hold a founding meeting with prospective members.
- Articles of Association: Draft and notarize the Articles of Association.
- Approval from Ministry of Law and Human Rights: Submit the deed for approval.
- Tax Registration: Obtain a Tax Identification Number (NPWP).
- Obtaining NIB – Business Identification Numbers
- Registration with the Ministry: Register the cooperative with the Ministry of Cooperatives and SMEs.
- Open the bank account
Foundation (Yayasan)
A Foundation, or “Yayasan,” is an organization that focuses on social, educational, or religious activities.
Benefits of Foundations
Foundations can receive donations, grants, and government support for their activities.
How to Register a Foundation
- Deed of Establishment: Draft and notarize the foundation’s Articles of Association.
- Ministry Approval: Obtain approval from the Ministry of Law and Human Rights.
- Tax Registration: Obtain a Tax Identification Number (NPWP).
- Business License: Secure necessary business licenses and permits (NIB – Business Identification Numbers or certificate standards)
- Open the bank account
Non-Profit Organizations
Non-Profit Organizations operate for the public good without profit motive.
Advantages of Non-Profit Organizations
They can receive donations, grants, and are often eligible for tax exemptions. The organization can run activities based on the same interest or purposes set by the founders or even its members.
Registration Requirements for Non-Profits
- Legal Structure: Choose an appropriate legal structure (e.g., foundation or association).
- Articles of Association: Draft and notarize the Articles of Association.
- Approval from Ministry of Law and Human Rights: Submit the deed for approval.
- Tax Registration: Obtain a Tax Identification Number (NPWP)
- Business License: Secure necessary business licenses and permits (NIB – Business Identification Numbers or certificate standards
- Open the bank account
Legal Requirements for Company Registration
Understanding and complying with legal requirements is essential for successful company registration in Indonesia. This includes meeting capital requirements, adhering to foreign ownership limits, and obtaining necessary licenses.
Required Documents for Company Registration
The documentation required for company registration varies depending on the business structure but generally includes:
- Articles of Association
- Shareholders or founders identities
- Management identities
- Address
- Purposes and objectives of registering a company
Cost of Registering a Company in Indonesia
The cost of registering a company can vary widely based on the type of business entity and the industry. Costs include notary fees, license fees, and professional fees
Common Challenges in Company Registration
Some common challenges include selecting the right type and structure of the company, navigating bureaucratic procedures, understanding regulatory requirements, and managing the costs associated with registration.
Tips for Successful Company Registration
- Thorough Research: Understand the legal and regulatory requirements.
- Professional Advice: Seek guidance from legal and business professionals.
- Complete Documentation: Ensure all required documents are in order.
- Timely Registration: Follow up on the registration process to avoid delays.
Conclusion
Understanding the different types of companies in Indonesia is crucial for successful business registration. By following these steps and seeking professional advice, you can navigate the registration process smoothly and establish a thriving business in Indonesia.
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