Types of Business Entities in Indonesia

With a massive population of over 276 million locals accompanied by its strategic location on the world map, Indonesia is one of the most popular destinations to establish a business.

Moreover, there are various types of businesses that you can establish depending on your needs and considerations. We have listed the different types of entities below for you to consider before setting up a company in Indonesia.

What are the Types of Entities You Can Set Up in Indonesia?

Moreover, there are 3 types of business entities that investors can set up in Indonesia. These include:

• Local Company/ Perseroan Terbatas (PT)
• Foreign-owned Company/ Penanaman Modal Asing (PT PMA)
• Representative Office (KPPA)

1. Local Company / Perseroan Terbatas (PT)

PT is also famous as a limited liability company which is a legal entity to run a business that consists of capital shares. It is the most common business entity in Indonesia’s market as it has a small capital requirement for start-ups, and it has a faster set-up time as compared to foreign companies.

A PT company usually also consists of 2 local shareholders, 1 director, and 1 commissioner. However, the downside to a PT company is that no percentage of foreign ownership is allowed. This means that only local entrepreneurs can incorporate this business entity.

The approximate time taken to set up a PT is roughly 3-4 weeks, and this is highly important for individuals who wish to enter the local business with no intention of involving any foreign investors.

The minimum investment values are 3,500 USD – 35,000 USD, 35,000 USD-700,000 USD and > 700,000 USD for small, medium, and large companies respectively.

2. Foreign-owned Company / Penanaman Modal Asing (PMA)

A PT PMA company is considered to be a wholly or partially foreign-owned limited liability company which is governed by the Foreign Capital Investment Law and approval from the Capital Investment Coordinating Board (BKPM) is required before incorporation.

However, the core benefit of incorporating a PT PMA company is that it is the ideal legal method for foreign-owned businesses to operate and generate revenue in Indonesia. However, due to its international position in the market, the start-up capital value will be high, and it is not available for all business fields.

Hence, the minimum investment value for a PT PMA company is estimated to be 700,000 USD plus a long waiting time of 10 weeks for establishment. Hence, this form of business entity is not commonly chosen unless you are a foreign investor or company that plans to operate business in Indonesia.

3. Representative Office (KPPA)

A representative office (KPPA) is also known as a branch of an overseas parent company, and it does not help your company generate revenue. The purpose of establishing a representative office in Indonesia is to conduct market research to analyse the suitability of the country for your company and for corporate communications with a total life of up to 5 years.

However, you are allowed to apply for KITAS under a KPPA for the Chief Representative Officer if he is a foreigner. The advantage of setting up a KPPA is that there is no minimum capital required and it has a fast set-up time of 7 weeks.

However, the downside of KPPA is that no revenue will be generated, and it is only valid for a maximum of 5 years. A KPPA works best for foreign investors or companies that do not want to jump right into the Indonesian market before conducting research and evaluation.

What are the Documents Required for Incorporating a local PT/ PT PMA Entity?

The documents needed to incorporate a local PT or PT PMA company are:

1. Company Documents

• Power of Attorney for submission document signed by each shareholder
• Shareholder documents
• Rental agreement between the company & building management
• Original building domicile/statement from the building management
• Building & land tax receipt (PBB) including the payment approval of the current year
• IMB or certificate of ownership if the building is owned
• Statement for lease (if any)
• Min. 3 office photos – reception, signage of company & office room with business activity
• Statement of domicile issued by the company & acknowledged by the building management
• Company letterhead & copy or sample design of the company stamp

2. Shareholder Documents

• Copy of Article of Association and its amendment – in English r Bahasa Indonesia
• Business registration certificate
• Board of Directors structure

3. Personal Documents – Directors & Commissioners

• Foreigner: Copy of coloured passport with a min. 18-month validity and 4 blank pages
• Local: ID card (KTP & Taxpayer Identity Number)
• Family card (KK)
• Indonesia visa stamp
• Residence of hotel or apartment domicile letter for the director
• Recent passport-sized photos with red background for each Board of Director – edited photos are not accepted

What are the Documents Need for Incorporating a KPPA?

For KPPA, the documents required are slightly different from a Local PT/ PT PMA company. These documents are down below:

1. Company Documents

• Article of Association from the holding/ parent company with the Board of Director structure, shareholder, registered address, and business field
• Letter of Appointment (LoA) signed & sealed by the director of the holding/ parent company
• Letter of Statement (LoS) from the proposed Chief Representative Officer (CRO) that they accept the position as CRO, signed & sealed with stamp duty (Material 6000) if the letter is signed in Indonesia
• Letter of Intent (LoI) signed & sealed by the holding/ parent company
• Letter of Reference (LoR)
• Original building domicile/statement from the building management
• Building & land tax receipt (PBB) including the payment approval of the current year
• IMB or certificate of ownership if the building is owned
• Statement for lease (if any)
• Min. 3 office photos – reception, signage of company & office room with business activity
• Statement of domicile issued by the company & acknowledged by the building management
• Company letterhead & copy or sample design of the company stamp

2. Chief Representative Officer Documents

• Foreigner: Copy of coloured passport with a min. 18-month validity and 4 blank pages
• Local: ID card (KTP & Taxpayer Identity Number)
• Family card (KK)
• Indonesia visa stamp
• Residence of hotel or apartment domicile letter for the CRO
• Recent passport-sized photos with red backgrounds – edited photos are not accepted

Procedure to Incorporate an Indonesia Company

There are 6 steps for company incorporation in Indonesia, which will take approximately 1-2 months for complete registration.

Step 1: Apply for a company name

Check your desired company name is available – you can use our free company name checker to do so! As a result, if the name is available, you may proceed to apply and register for your desired company name with the Ministry of Law and Human Rights.

Here are some tips when choosing a company name. Do not select names that:

• Are similar to existing companies
• Are identical or similar to any name of a state, government, or international agency without official approval
• Does not conform to the purposes/ objectives/ activities of the company
• Consist of a set of numbers, letters, or figures that do not form any words

Step 2: Apply for a Deed of Establishment

Submit the Deed of Establishment online, along with the certificate of the bank account and an official copy of the bank transfer advice. If the application is successful, you will receive legalization on the establishment of the company and can announce the establishment within the following 14 days.

Step 3: Apply for the Certificate of Company Domicile

The next step is to apply for the Certificate of Company Domicile which all Indonesian limited liability companies are required to hold.

Step 4: Obtain a tax registration number (NPWP)

Afterwards getting your Certificate of Company Domicile, you will need to obtain a valid tax ID for financial purposes with the local tax authority. The documents required for this application include:

• Deed of Establishment
• The identity card of the director
• Statement letter to confirm the place of business

Step 5: Get your business identification number (NIB)

However, the NIB is obtained from the Online Single Submission. This will be a unique number that will be assigned to your company as a form of identification (like an identification card!).

Step 6: Apply for other relevant documents and licenses

Hence, different types of businesses require various business licenses. Depending on the nature of your business, you will need to apply for licenses before you have to start your operations.