Sole Proprietorship in Indonesia: Pros, Cons & Steps to Setup

Sole proprietorship is a type of company in which one person incorporates and runs the business personally and there is no legal distinction between owner and business entity. In Indonesia, a Usaha Dagang (UD) is equivalent to a sole proprietorship; it is the simplest form of company in Indonesia.

Incorporating a sole proprietorship in Indonesia has its advantages and risks, which must be carefully considered before registering your company.

A company is considered a foreign company if there is a foreign investor or shareholder in the company. Such companies must get approval from the board coordinating capital investment before engaging in Indonesia’s business activity.

The amount of capital invested in a particular business will define the business company’s size and the eligibility to sponsor foreign employees’ work permits. Indonesia allows total foreign ownership in industries that are not categorised under the Positive Investment List.

If you are a foreign business owner who wants to register your company for full ownership, you have the following options:

There are many advantages to owning a sole proprietorship in Indonesia. Some advantages are:

There is always a risk to every business venture. Everyone who runs a business must understand the risks involved and strike a balance between risks and profit ratios. The following are risk factors which are involved in owning a sole proprietorship:

Documents are the most important objects for verification and for the incorporation of an Indonesian company such as sole proprietorship. These are the following documents which are necessary to set up UD:

There are some steps that could be taken after setting up the new sole proprietorship in Indonesia. Every business has some plans before it begins operations. After the business has been started, the plans can be executed. After a sole proprietorship begins operations, the following steps must be taken:

Before starting a sole proprietorship, the owner must identify which demographic is going to be targeted. The target audience and their needs will inform the marketing of the business’s products.

After targeting the audience, the next step is how to reach the targeted audience. A decision about by which the audience is to be reached must be made.

After reaching the audience, the sole proprietorship owner or sole proprietor must identify the problem to which the target audience would like a solution.

The product must be valid and authentic so that it will be useful for the target audience during the relevant time period.

The owner must hold a free trial or demonstration to the users of the product to help them know more the features and properties of the product.

The brand slogan must be created and advertised in such a way that users will remember it.

The owner must give incentives to the product users during the starting time period.

This step is necessary in order to increase the performance of the product, and thus the company’s profitability, to its maximum level.