One of the first steps to setting up a company in Indonesia is to understand the different types of companies in Indonesia. Company names are very important to the business as it is a key identifier of the brand. A strong and sticky company name can be profitable in the long run, in terms of brand equity.
Types of Companies in Indonesia
Between state-owned (BUMN) and private-owned companies (BUMS), there are five different acronyms commonly used when it comes to registering a company in Indonesia.
State-Owned Company (BUMN)
A state-owned company, or ‘Badan Usaha Milik Negara’ (BUMN), is an independent body that is partially or wholly owned by the Indonesian government. There are two main types of BUMN:
- PERUM
A public company (PERUM) is owned by the state and is focused on maximising profits. The company’s capital is owned by the government and employees in such companies are considered civil servants. - PERSERO
A limited company (PERSERO) receives its capital, usually in the form of shares or stocks, wholly or partially from separated state assets. These companies aim to gain profits while benefiting the public.
Private-owned Company (BUMS)
In contrast, private-owned companies are companies set up by a singular founder or a group of private investors. Because of that, they earn a share of the profit that the company makes. There are three common types of private-owned companies:
1. Company Limited (Perseroan Terbatas – PT)
Firstly, on the list of common types of private-owned companies, PT is top on the list. In a PT, there is a requirement of a resident director, a minimum of two shareholders and a commissioner. There are two types of PT in Indonesia noteworthy, namely:
- Perseroan Terbatas Penanaman Model Dalam Negeri (PT PMDN)
A Local Limited Liability Company - Perseroan Terbatas Penanaman Modal Asing (PT PMA)
A Foreign Limited Liability Company
2. Firma (Fa)
In other countries, this business entity represents a partnership between two or more individuals doing business. This entity is regarded as having greater financial capabilities and being efficient within the company.
3. Commanditaire Vennootschap (CV)
Moving on, CV is a Limited Partnership comprising a minimum of, but not limited to, one managing partner and one limited partner. The managing partner will oversee the day-to-day operations of the business, and the limited partner will provide capital for the business.
Most Common Business Entities in Indonesia
There are three most common business entities in Indonesia, namely:
- Local Companies (PT PMDN)
As mentioned above, a PT PMDN is a local limited liability company with 100% local ownership. A PT PMDN is popular as it takes 3-4 weeks to set up the company, a shorter period compared to a period of 10 weeks to set up a foreign company. It also has a smaller capital requirement compared to PT PMA. - Foreign Investment Companies (PT PMA)
A PT PMA is a foreign limited liability company that can have up to 100% foreign ownership depending on the business field. Setting up a PT PMA is a legal way for foreigners to generate revenue and operate in Indonesia. - Representative Offices (KPPA)
A KPPA is a straightforward way for foreigners to establish a presence in Indonesia. It serves as a channel for foreigners to engage in promotional activities, research, and communication with their Indonesian counterparts. It is not allowed to generate revenue, however, it does not have the maximum capital it can hold nor restrictions when it comes to foreign ownership or business field.
How to Select Company Name in Indonesia
Selecting a company name would be the first step in registering a business in Indonesia. Amongst all the common words used in company names, here are some insights as to what they are.
As expected, ‘Indonesia’ is the most common word in company names, along with words like ‘Jaya’ and ‘Abadi’, which mean Victorious and Eternal respectively. Similar to other countries, it is also common for companies to be named after the founder.
There are some requirements when it comes to selecting a PT PMA company name, which are:
- Minimum of 3 words
- Cannot be misleading
- Cannot be similar to an existing entity name or government institution
- No use of vulgarities
- Use of only Roman Alphabets
- No series of letters or numbers that do not form a word
How to Change Company Name in Indonesia
Changing a company name in Indonesia is not impossible. However, you need to obtain a new tax card in the occasion that you intend to change your company name.
The authorities would also have to approve changes in the local tax office, the Indonesian Investment Coordinating Board (BKPM), and the Ministry of Law and Human Rights as well. This simply signifies the paperwork and expenses that come with changing a company name.
FAQs
Just like in any country, there are requirements and compliance that foreigners need to follow to operate business in Indonesia. This is made easy as there are numerous service providers that can assist you in these matters, be it corporate services or obtaining visas and licences. An example of these service providers is our company, here at Paul Hype Page.
Indonesia is a majority Muslim country however is not a Muslim state. Despite that, Islamic principles do influence political decisions as Indonesia has the largest Muslim population in the world.
Indonesia’s national language is Bahasa Indonesia and Javanese is also one of the most common primary languages spoken. It is only in the city of Jakarta and tourist hubs such as Bali that English is spoken as there are a myriad of tourists and foreigners alike.
Indonesia has the largest economy in south east Asia. Furthermore, there is already a large foreign business community in areas such as Bali and Jakarta as they see a large number of tourists and travellers throughout the year.
Bali is a known tourist hub worldwide, known for their sunny beaches and sights to behold. Jakarta on the other hand is the country’s capital, being the economic, cultural and financial centre.
Indonesia has a growing economy that many foreigners see as an opportunity. Despite the restricted international travel situation, Indonesia’s travel industry still has potential due to the thousands of islands Indonesia is made up of.
Furthermore, before the covid-19 pandemic, Indonesia was regarded as a popular destination for tourists, mostly in Bali and Jakarta. There are numerous foreign companies that has set up there due to the myriad amount of tourists that travel there.
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