Category: Business Establishment & Licenses
Written by Rivary Finan Hernawan on 21/04/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
When we say the word license, a lot of things might come into our mind. To legally drive a car, we need a driving license. To legally use software, we need a software license. Similarly, doing business is not too different from those two examples. Before a company wants to legally do its business activity, it must obtain a license. This license is what we usually refer to as Business Licenses.
In this article, we will be discussing business licenses. This article aims to raise people’s awareness of the types of business licenses in Indonesia, the laws concerning them, and the steps they need to take to obtain them.
With this service, we aim to help you by obtaining the necessary licenses to operate your business legally in Indonesia as well as help you to comply with any additional commitments needed.
Business Licenses are permits issued by government agencies that allow individuals or companies to conduct business within the government’s geographical jurisdiction. To put it simply, it is a license to start a business issued by the local government.
As it is regulated based on geographical jurisdiction, the requirement of business licenses typically varies between countries. Often it is required to own multiple licenses that are issued by various government departments and/or agencies. As such, a company may be required to own a lot of business licenses before they want to do its business. Without an appropriate business license, government agencies can fine or close the operating business.
In Indonesia, it is also compulsory for companies to obtain business licenses according to the regional jurisdiction. The licenses will be issued by the government once the company has fulfilled its requirements.
Both foreign and domestic investments are administered by BKPM, as it regulates the Company Law and the Foreign Investment Law. Investors must apply for BKPM approval first. Despite that, BKPM does not issue licenses for some high-risk industries such as financial institutions, insurance, or oil and gas. They are issued by the corresponding industries’ regulating bodies. For example, import and licenses for hiring non-Indonesian workers are issued by the Ministry of Labour.
To start a business in Indonesia, it goes without saying that a business license must be acquired beforehand. The reason is that we need to inform the government about our legal business activities. In addition to that, the following points also serve as additional reasons for having a business license in Indonesia.
Not only does it serve as a requirement for starting the business activity, but a business license also comes with the following advantages:
In order to establish a company in Indonesia, there are four laws that you have to look for:
According to their purpose, we can divide business licenses into several types. For instance, there are general licenses and special licenses.
Business licenses can also be categorized between primary and non-primary licenses.
To obtain a business license in Indonesia, in general, a company must prepare the following requirements beforehand:
On top of those, the company may also be required to acquire the following permits in their business areas:
Other requirements might be needed depending on the business.
Many operational licenses may now be applied through the Online Submission System (OSS). The system links our company’s data to different government agencies such that multiple permits and registration are issued through the system.
Here are the steps for a company to acquire a business license. The first three steps encompass the way to obtain NIB as well.
However, without prior experience, it may be challenging to navigate through the system and obtain the required licenses. Furthermore, some business licenses require additional commitments, and failure to fulfill them will result in licenses that are non-effective. The additional commitments are not specifically listed in the system, and this may confuse the applicants.
O’Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 186. ISBN 0-13-063085-3.
BKPM – Indonesia Ease of Doing Business 2018
UK Departement for International Trade – Exporting Guide to Indonesia
NSWI BKPM – Business Area Establishment
Sekretariat Kabinet Republik Indonesia – OSS for Business Licensing
SIUP is one of many forms of business license. Specifically, it is a license for a business entity to conduct trade or business activities. However, the functionality of SIUP has been replaced by NIB and Business Licenses.
In addition to the requirement, a company must have completed its manufacturing phase. In other words, they have to be in at least the production phase.
While they serve the same purpose based on functionality, some riskier business services, such as financial business, may strictly require a business license instead of NIB. However, NIB itself is sufficient for lower-risk businesses, such as when you want to run a cafeteria.
Even if a business already has a Business License, it is still obligated to register the business through the OSS system to obtain a NIB. The Business License will still be in effect after getting the NIB.
Thank you for sharing
If not, please tell us what you are looking for and see if we can help you.