Business License

Written by Rivary Finan Hernawan on 01/08/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Introduction

Before a company can legally engage in business activities, it must obtain a business license. This article aims to raise awareness about the types of licenses for business in Indonesia, the laws governing them, and the steps required to obtain them.

Definition

Business licenses are permits issued by government agencies that allow individuals or companies to conduct business within the government’s geographical jurisdiction, it is a license to start a business issued by the local government. Its requirement is typically varies and often necessitates multiple licenses issued by various government departments and agencies. Without an appropriate business license, government agencies can fine or close the operating business.

Legal Framework

Key regulations include BKPM Regulation Number 14 of 2015, Government Regulation Number 24 of 2018 on Electronic Integrated Business Licensing Services, BKPM Regulation Number 1 of 2020, Law Number 11 of 2020 on Jobs Creation (the “Omnibus Law”), and Government Regulation 5 of 2021 on Risk-Based Business Licensing.

The Importance of Business License

To start a business in Indonesia, acquiring a license for business is mandatory. The reasons for this requirement include:

Public Assurance
Ensuring the public that business activities are safe and comply with Indonesian law.
Government Trust
Demonstrating to the government and other authorities that the company can be trusted and follows pertinent laws.
Proof of Business Activities
Serving as tangible proof of the types of business activities the company engages in.
Organizational Order
Helping to organize the business sector within Indonesia, thereby avoiding chaos.

Benefits For Using Professional Services

Obtaining a business license in Indonesia comes with several advantages:

Legal protection
Preventing the business from being closed due to illegal operations.
Funding Opportunities
Making the business eligible for funds, as it shows government approval.
Credibility
Convincing customers that they are interacting with a legal business.
Trademarking
Serving as proof of ownership over the company’s brand name.

The Process to Obtain A Business License

To obtain a business license in Indonesia, a company must prepare the following requirements:

Company’s Articles of Association (AOA)
Funding Opportunities
Approval from the Ministry of Law and Human Rights
Business Identification Number (NIB)
Company Tax ID
Value of investment details

Additional permits may be required depending on the business area, such as:

Location Permits
Water Location Permits
Environmental Permits
Building Permits

Many operational licenses can now be applied for through the Online Submission System (OSS). The steps to acquire it are:

Register at OSS
Create an account at www.oss.go.id
Complete the Registration
Provide necessary identification and company formation details.
Input Company Information
Enter business details into the OSS system to obtain the NIB.
Apply for Business License
After acquiring the NIB, apply for the business license.

How We Can Help

Putranto Alliance provides comprehensive support to clients in obtaining various types of business licenses in Indonesia, ensuring compliance with all regulatory requirements. Our services include:

Business License Consultation
We offer expert advice on the specific types of licenses required for different industries, such as construction, real estate, mining, and trading.
Application Preparation
We assist in preparing all necessary documentation, including the Company’s Articles of Association (AOA), approval from the Ministry of Law and Human Rights, Business Identification Number (NIB), and Company Tax ID.
Online Submission System (OSS) Navigation
We guide clients through the OSS platform, from registration to the submission of company information and the application for business licenses.
Special Permits Assistance
We help secure additional permits such as Location Permits, Water Location Permits, Environmental Permits, and Building Permits, depending on the business's specific needs.
Post-License Compliance
Our team ensures that businesses remain compliant with all regulations post-license issuance, including regular updates and renewals.
Foreign Investment Support
For foreign investors, we provide guidance on navigating the regulations set by the Investment Coordinating Board (BKPM), including assistance with any industry-specific requirements or exceptions for high-risk sectors.

FAQs

What are the differences between an Indonesian Business License and SIUP (Surat Izin Usaha Perdagangan)?

SIUP is a specific type of business license for trade activities. Its functionality has been replaced by NIB and Business Licenses.

Is there any standard a company must meet before obtaining a business license?

A company must have completed its manufacturing phase, meaning it should be in at least the production phase.

What are the differences between an Indonesian Business License and NIB (Nomor Induk Berusaha)?

While they serve similar purposes, riskier business services may strictly require a business license, whereas NIB is sufficient for lower-risk businesses.

What if my business already has a Business License but does not yet have a NIB?

The business must still register through the OSS system to obtain a NIB. The Business License remains in effect after obtaining the NIB.

Who regulates foreign and domestic investments, and are there any exceptions for high-risk industries?

Both foreign and domestic investments are administered by BKPM, which regulates the Company Law and the Foreign Investment Law. However, BKPM does not issue licenses for high-risk industries such as financial institutions, insurance, or oil and gas.

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