Sole proprietorships, also known as Usaha Dagang (UD), are among the most common forms of business entity in Indonesia. The information provided in this article should suitably equip prospective business owners with what they need to know to capably and successfully run a sole proprietorship.

Sole Proprietorship

What is a UD and how is it officially defined?

Before discussing the Usaha Dagang (UD), the topic of sole proprietorships must be discussed.

The sole proprietorship is a type of enterprise in which one person runs the business personally and there is no legal distinction between owner and business entity. A UD is equivalent to a sole proprietorship; it is the simplest form of company in Indonesia. It can easily be established by a single person without any legal issues. Anyone can establish a UD by completing the documents through a notary, as well as organizing for reception of business permit documents. The notary will need to see a domisili perusahaan (where the company will be located), KTP, possibly some other documents, and a company stamp.

What Documents are required to Set up a Sole Proprietorship?

Documents are the most important objects for the verification and for the setting up of a new business such as a sole proprietorship. These are the following documents which are necessary to set up UD:

Name:

The name must be identified. One must register with that name to make the name the brand of the company.

Employer Identification Number:

Sole proprietorship owners have to register for an Employer Identification Number.

Trademark:

Trademarks are very important in setting up a sole proprietorship in Indonesia. By choosing an appropriate name and getting a trademark to keep the business secure and safe, other competitors will not be able to use the proposed name after the business has been registered. Trademarking also keeps a business owner safe from competitors if the business name becomes a brand.

Business License:

Those who are starting a new business must have a license of that business. The license allows a business owner to become responsible for the business’s product or services which the owner providing as a sole proprietor.

What are the advantages of owning a sole proprietorship?

There are many advantages to owning a sole proprietorship. Some advantages are as follows:

  • Control of the company

The main advantage in owning a sole proprietorship is that the owner of the company has complete control. The owner doesn’t have to pay any unnecessary loss or penalty. The owner is fully responsible for the success or failure of the sole proprietorship.

  • All profits received by the owner

This is the most important advantage in owning a sole proprietorship. The owner of the sole proprietorship will receive all profits earned. The sole proprietorship owner does not have to pay anything from this profit to anyone.

  • Low starting cost

Those who start a sole proprietorship will find that the starting cost is very low. There is also no need to pay any extra costs for registration or any other fixed costs.

  • Privacy

A sole proprietorship has a level of privacy unrivaled by any other type of business. Information which the owner does not want to be shared with anyone else can be kept confidential. All profit and loss information can also be kept secret.

  • Ease of winding up

Those whose sole proprietorships are making losses instead of profits may want to close down the business. Such people can easily wind up the business without any restrictions.

  • Knowledge of all business circumstances

People who own their own sole proprietorship will know all the possible circumstances their business might face.