Similar to many other countries in the world, there are many different types of business entities in Indonesia. In these articles, you will be provided with some useful information in relation to the different types of business entities in Indonesia.
A business entity is an organization created by one or more natural persons to carry on a trade or business. Business entities are subject to taxation and must file a tax return. Some business entities are considered for federal tax purposes to be not separate from its owner. In this article, you will be provided with the types of business entities that you can incorporate in Indonesia.
Perseroan Terbatas (PT) is also known as a Limited Liability Company in Bahasa Indonesia. A PT is a legal entity to run a business that consists of capital shares, which is a part owner of shares owned. This is the case as every company’s capital consists of shares that can be traded in the market and the changes in the company can be done without the need to dissolve or strike off a company.
In Indonesia there are two different types of PT company in Indonesia, i.e.:
A public company or also known as PT Aset Manajemen Company (PERSERO) in BahasaIndonesia. It was established on 27th February 2004 through Government Regulation No. 10 of Year 2004. A PERSERO company in Indonesia is a company that carries out the main task of managing the assets of the former Indonesian Bank Restructuring Agency (“IBRA”), both credit assets, shares and property.
The main objectives of establishing a PERSERO Company is to seek profit and to provide services to the public. The start-up capital comes in part or in whole from the separated state assets in the form of shares. The company will be headed by the board of directors while the employee is categorized as private employee from the PERSERO Company.
The examples of companies that are included as PERSERO are PT Bank Mandiri (Persero) Tbk and PT Bank Rakyat Indonesia (Persero) Tbk.
Public Company (PERUM)
A public company (PERUM) is a type of State-Owned Enterprise in Indonesia whose capital is still owned by the government, but has a similar nature as a service company (partnership) and the rest is a PERSERO company.
A PERUM Company consists of the following features:
- it will be considered as a legal entity even if it was registered for non-profit reasons;
- its capital in entirely owned by the Indonesian state and will fall under the Civil Code;
- it is mostly used for socio-economic purposes, compared to the PERSERO company;
- the employees of such entity will be considered employees of the Indonesian state.
The state agency company or also known as PERJAN in Indonesia is a state-owned company. Unlike A PERUM, a PERJAN Company is set up with the main purpose to serve the interests of the community by paying attention to its efficiency, effectiveness, and economics and satisfying service. The amount of capital of the service company is determined through the Indonesia’s State Budget. A PERJAN company is a State-Owned Enterprises (SOE) of Indonesia whose entire capital is included in the state budget which is the right of the department concerned.
A Private-Owned Enterprises are also known as Badan Usaha Milik Swasta (BUMS) in Bahasa Indonesia. In accordance to Article 33 of the 1945 Constitution, this business entity are usually given to manage economic resources that are not strategic and vital or that do not controls the sustenance of the citizens in Indonesia. In Indonesia, Private-Owned Enterprises can be differentiated to 3 different types. They are:
- Firma (FA);
A FA business entity in Indonesia must be established by two or more people. The advantages of setting up a FA in Indonesia are as follows:
- Clear legal status
- Greater financial capability
- Easier to establish
- Division of labor would be among the members in accordance to their skills and expertise
- Commanditaire Vennootschap (CV); and
A CV is basically a limited liability partnership in Indonesia therefore the procedures for forming a CV company is the same as setting up a firm in Indonesia. The benefits of setting up a CV are as follows:
- Management can be verified
- Ability to get more credit
- Easier to establish
- Able to amass a larger amount of capital
- Limited Company (PT).
As mention on point 1 above, a Perseroan Terbatas (PT) is also known as a Limited Liability Company in Bahasa Indonesia. A PT is a legal entity to run a business that consists of capital shares, which is a part owner of shares owned. The advantages of forming a PT company in Indonesia are as such:
- Shares can be traded easily
- Limitation liability for company’s debt
- Can attract capital from the public easily
- Company’s survival is guaranteed
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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