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:


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.


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.

What are the risks of owning a Sole Proprietorship?

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:

  • Personal liability

The owner is personally liable for the company’s losses.

  • No safety net

The owner does not have any safety net to protect the business and firm because the owner often does not have any idea about the risks that may arise in the future.

  • No health insurance

UDs are often not equipped with health insurance.

  • Loss of investments

UD owners are at risk of losing their investments because they own the business by themselves. Therefore, they face such losses in certain circumstances.

  • Injury liability

There is a high risk of injury liability because if the owner gets injured, there is a possibility that no one could be around to operate the business.

  • Lost opportunities

Owning any business, including a sole proprietorship, takes up much of the owner’s time and effort. Therefore, the business owner will have to lose out on other opportunities which the owner could otherwise have accepted.

What steps should be taken after the Sole Proprietorship has been Set up?

There are some steps that could be taken after setting up the new sole proprietorship. 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:

Identifying the Target Audience

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.

Reaching the Audience

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.

Identifying the Problem

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

Confirming Product Validity

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

Holding a Free Trial/Demonstration

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.

Creating a brand slogan

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

Offering Incentives

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

Testing and Updating the Product

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