Indonesia is home to many businesses which include companies and representative offices. Each of these business entities has distinctive characteristics. They also come with specific advantages and disadvantages which do not apply to other business entities in any way.

Companies and Representative Offices in Indonesia

Indonesia’s business scene is one that has truly begun to flourish. The country’s economy has grown at a rapid pace in recent years. The general amount of entrepreneurial activity across the country has also increased exponentially. Therefore, many people, whether locals or foreigners, have developed an interest in starting a business of their own in Indonesia. When one chooses to do so, it is important to select the business entity which is most appropriate for the business’s operations. Some choose to set up a company in Indonesia; others, a representative office. Both of these options have unique features as well as specific advantages and disadvantages.

Company Types in Indonesia

In Indonesia, a business owner may select the option of starting a company. However, companies owned by people, also known as privately-owned companies, are not the only types of companies that exist in Indonesia. Some companies are either completely or partially owned by the government. Such companies are known as state-owned companies.

State-owned companies include public companies (Perum) and liability companies (Persero). A Perum is typically set up in such a way that the generation of profit is prioritized over the provision of services to the public. Nevertheless, a Perum does have social functions which accompany its economic functions. The employees of a Perum are regarded as government workers. The capital of a Perum is derived from government sources. A Perum is led by directors and is also a legal entity, which thus allows it to prosecute or be prosecuted itself according to the laws of Indonesia.

A Persero is a company which has all of its capital in the form of stock. A Persero usually places its shares into a stock exchange so that these shares can be traded. A Persero’s objectives are twofold: these are the provision of services to the public as well as the generation of profit. Its capital is derived from government assets; these assets are kept separate in the form of shares. Those who work in a Persero are deemed to be private employees. Just as is the case with a Perum, a Persero is led by directors.

Privately-owned companies in Indonesia include firms and limited companies (PTs). Firms are business entities which have been established by more than one person. Every owner of a firm has direct responsibility for each of the firm’s obligations. A firm is established through the execution of an agreement deed; this execution takes place in front of a notary. The capital of a firm is obtained via the submission of some or all of the property of the firm’s owners. Firms are relatively easy to establish, have verifiable legal status, and possess increased financial capability. However, the owners of a firm have unlimited liability for its debts. The continuity of a firm is also perpetually at risk because conflict among owners or one or more departures of owners may lead to the ultimate ruin of the firm.

A variant of the firm is the Commanditaire Vennotschap (CV). A CV is formed in the same way as is any other firm. The advantages and disadvantages of a CV are also the same as those of a firm. However, the primary difference between a firm and a CV lies in its ownership structure. Unlike a firm, a CV is owned by active and silent partners. Active partners are people who provide capital for the CV while also running the business. They are completely responsible for all of the CV’s liabilities and assets. Silent partners are people who provide venture capital. They are only responsible for the capital which they have paid.

PTs are business entities which have their capital divided into shares. Only those who own holdings of a PT are held responsible for the debts and liabilities of a PT. PTs are divided into closed PTs which have limited shareholding and open PTs which have public shareholding. A PT is driven by profit, led by directors, has economic and commercial functions, and is not established by any government authorities. Its employees are regarded as private employees. A PT’s owners benefit from limited liability for debts incurred, the ability to restrict stock ownership as necessary, the ability to easily trade shares, the increased likelihood of business continuity, and the increased chances that the public will channel capital towards the PT. However, PTs are relatively expensive to establish. Those who own a PT must also make tax reports to the government. They require specific permits before business operations may be commenced and also have no effective means by which shareholders’ interests could be protected.