Guide to Setup a Company in Indonesia
Indonesia recognizes several types of business entities, many of which foreign investors can use to operate a business in the country. NHGlobal Partners can advise you on the various options available for your circumstances and assist you with the incorporation process. Our local experts can work closely with you to form the optimal business entity.
Limited Liability Company
Limited liability companies in Indonesia can be 100% owned by foreign investors. It is typically organized by foreign nationals and capitalized with foreign funds. This entity, referred to as Perseroan Terbatas in Indonesia, is the most common type of entity in Indonesia. This type of business structure requires a minimum of one director and two local Indonesian shareholders. This type of entity also requires one commissioner who does not need to be a resident of Indonesia. The commissioner is responsible for supervising the company, approving the budget plan the company’s board of directors completes and examining the annual report.
This type of entity requires paid up share capital. The amount of this capital depends on the size of the company, according to the following guidelines:
- Small size company – Paid up capital between USD $3,745 to $37,435
- Mid-sized company – Paid up capital between USD $37,435 to $748,740
- Lage company – Paid up capital in excess of USD $748,740
This paid up capital must be deposited into the corporate bank account in Indonesia after incorporating the business. This process often involves additional steps and may take more time to establish.
Establishing a joint venture with a local Indonesian partner is an effective way to establish a business. This option is often used when a foreign investor wants to pair up with a company that offers a local advantage, such as an established distribution chain, government relationships client contacts or local market expertise. Partners share in the profits, losses and management of the company.
Foreign Owned LLC
Limited liability companies that are partially or wholly owned and controlled by foreign investors are called Penanaman Model Asing or PMAs. These companies are governed by the Foreign Capital Investment Law and must obtain approval from the Capital Investment Coordinating Board before they can conduct business in Indonesia. Stakeholders of a PMA that is engaged in services must present an investment plan with a minimum investment of USD $1.2 million. 25% of this amount must be paid up as share capital.
This type of company must have at least one resident director, two shareholders and one commissioner. If the company is owned completely by foreign investors, its owners must sell a share of at least 5% of the company to a citizen of Indonesia or a legal entity of Indonesia within 15 years of starting up the business.
Indonesia does not impose restrictions on where this type of company can operate in the country. However, the company may be required to obtain multiple operating licenses from various government agencies, according to their intended business activity. Indonesia restricts certain business sectors from foreigners or only allow companies with partial or minority foreign ownership.
A public company in Indonesia must have a minimum of 300 shareholders and paid up capital in the amount of IDR 3 billion. These companies are subject to more stringent regulations. Indonesia does not require public companies to be listed on the country’s stock exchange.
Another option to establish a company in Indonesia is to use an Indonesia nominee. This option is often used when a business wants to quickly begin operations to secure contracts or close deals. Using a nominee LLC can also be an effective strategy to go around foreign investment restriction.
A final option is to establish a representative office. This type of structure is subjected to significant restrictions and limits the activity the business can engage in. These companies can only conduct market research and promotional activities and serve as the country’s buying/selling agent for the parent company. Representative offices can only have an operating license for two years. The Indonesian government may impose additional operating license agreements. This type of entity is restricted to certain sectors, such as trading, services, mining, oil and gas, and banking.
Steps to Register and Incorporate a Foreign Business
The steps to register and incorporate a foreign business depend on the type of business entity you select and your industry. The professionals at New Horizons can assist you with key aspects of registering and incorporating your business in Indonesia, including:
- Obtaining standard form of company deed
- Submitting an application to the Indonesian Investment Coordinating Board
- Applying to the Ministry of Law and Human Rights for approval of the deed of establishment
- Obtaining clearance for the company name at a bank
- Obtaining the Building Management Domicile Certificate
- Applying for the Certificate of Company Domicile
- Applying for permanent business trading license
- Obtaining company registration certificate
- Registering with Ministry of Manpower
- Naming an internal supervisor
- Obtaining Certificate of Approval
- Registering business license
- Applying for social security, health care insurance, taxpayer registration number and VAT collection
Employment Solutions While Incorporating Your Business
In addition to assisting you with the incorporation and registration process, New Horizons also provides comprehensive assistance with helping you establish a local Indonesian staff. Our local experts can advise you on employment laws in Indonesia or provide you with PEO services. Our comprehensive PEO services provide the following benefits:
- We handle all payroll responsibilities in a compliant manner
- PEO services allow you to set up your company more quickly
- We take on all Employer of Record responsibilities
- You can test out the market before making a large investment in it
- We help you with tax, payroll, employment and immigration compliance
- We draft employment contracts that are approved by local governmental agencies
- You can launch your staff sometimes in a matter of days
- We assume all employer of record liabilities
We comply with local employment laws, run your monthly payroll and draft local contracts so your staff can quickly get to work. Contact us to learn more about your available options.