Company Establishment

Written by Almer Adiyatma Rahimsyah on 24/07/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

Establishing a company is the process of forming and organizing a legal entity to conduct business activities. This process involves a series of steps that must be followed to ensure that the company operates legally and is bound by applicable laws.

Definition

In Indonesia, a company is a legal entity formed by individuals to engage in and operate a business. The company must be established and domiciled within the territory of the Republic of Indonesia. Companies must comply with existing laws and regulations to operate in Indonesia. There are two kinds of companies: legal entities and non-legal entities. This article focuses on legal entities.

Importance

Establishing a company is crucial for several reasons:

Legal Recognition
It provides a legal framework within which the business can operate.
Liability Protection
It separates personal assets from business liabilities.
Access to Capital
It allows for easier access to funding and investment.
Credibility
It enhances the business’s credibility with customers, suppliers, and partners.
Tax Advantages
Potential tax benefits and incentives.

Types of Legal Entities in Indonesia

Limited Liability Company/LLC (Perseroan Terbatas/PT)
An LLC is a legal entity that is a capital association established based on an agreement, conducting business activities with authorized capital divided into shares.The most important aspect of an LLC is the separation of assets between the company and its owners, and the limited liability of the owners.
Individual Legal Entity (Perseroan Perorangan)
An Individual Legal Entity is established by only one person and must be an Indonesian Citizen. An individual can only establish one individual legal entity and one company per year, limited to micro and small businesses (maximum business capital of up to Rp5.000.000.000,00 excluding land and building of the business premises). If an Individual company has more than one shareholder or does not meet the criteria for micro and small businesses, it must change its legal status to a company.
Foreign Investment Company/Penanaman Modal Asing (PMA)
PMA stands for foreign investment company, usually abbreviated as PT PMA. It is an investment activity to conduct business in Indonesia carried out by Foreign Investors, either using foreign capital entirely or in partnership with Domestic Investors. PMA can only conduct business activities in large businesses with an investment value of more than Rp10.000.000.000,00 unless stipulated by law.

Required Documents

As the founder of the company, please prepare and submit the following documents:

Individuals:
- For individuals: Prepare legal documents regarding identity, such as an identity card (KTP) for Indonesian citizens or a passport for foreigners.
- For legal entities: Prepare the articles of association and all amendments, as well as an authorization decree from the Ministry of Law and Human Rights .
Determining Authorized, Issued, and Paid-up Capital
- Authorized capital is determined by the company’s founders. Issued and paid-up capital must be a minimum of 25% of the authorized capital.
- Business capital in Indonesia has several criteria:
  - Micro: Up to Rp1.000.000.000,00 (excluding land and buildings of the business premises).
  - Small: Rp1.000.000.000,00 to Rp5.000.000.000,00 (excluding land and buildings of the business premises).
  - Medium: Rp5.000.000.000,00 to Rp10.000.000.000,00 (excluding land and buildings of the business premises).
  - Large: More than Rp10.000.000.000,00 (excluding land and buildings of the business premises).

Process

Identity Confirmation
- For individuals: Prepare legal documents regarding identity, such as an identity card (KTP) for Indonesian citizens or a passport for foreigners.
- For legal entities: Prepare the articles of association and all amendments, as well as an authorization decree from the Ministry of Law and Human Rights .
Determining Authorized, Issued, and Paid-up Capital
- Authorized capital is determined by the company’s founders. Issued and paid-up capital must be a minimum of 25% of the authorized capital.
- Business capital in Indonesia has several criteria:
  - Micro: Up to Rp1.000.000.000,00 (excluding land and buildings of the business premises).
  - Small: Rp1.000.000.000,00 to Rp5.000.000.000,00 (excluding land and buildings of the business premises).
  - Medium: Rp5.000.000.000,00 to Rp10.000.000.000,00 (excluding land and buildings of the business premises).
  - Large: More than Rp10.000.000.000,00 (excluding land and buildings of the business premises).

Duration

The duration for establishing a company in Indonesia can vary depending on the complexity of the specific requirements and procedures.

Generally, the process can be completed within 3 (three) working days, subject to regulatory approvals.

How We Can Help

Putranto Alliance extends a range of services designed to facilitate businesses throughout the entire company establishment journey. Our comprehensive offerings encompass legal guidance, licensing procedures, compliance oversight, and expert advisory assistance. By harnessing our specialized proficiency, enterprises can effectively navigate the intricate landscape of company establishment in Indonesia, fostering a sense of assurance and clarity.

Establishing Initial Presence
Our team provides guidance on navigating the regulatory landscape and procedures for company establishment in Indonesia, ensuring proper documentation and compliance with Ministry of Law and Human Rights guidelines.
Creating Deeds
With our allied notary, we can help create a company deed of establishment.
Licensing and Permitting
We handle the application process through the Online Single Submission (OSS) system for efficient licensing, ensuring all necessary permits and approvals are obtained promptly.

Taxpayer Identification Number (NPWP) Registration
Our experts facilitate the application and issuance of the company Tax Identification Number (NPWP) to fulfill tax obligations.

Compliance and Reporting
We guide clients on post-establishment reporting requirements and compliance with Indonesian regulations, ensuring proper documentation and records for regulatory purposes.

Legal Support
We offer legal counsel and support throughout the company establishment process, ensuring adherence to legal frameworks and requirements.

FAQs

How to establish a PT PMA (Foreign-Owned Company) in Indonesia?

Establishing a PT PMA (Foreign-Owned Company) involves several steps similar to those for setting up a local PT (Limited Liability Company) in Indonesia. The process includes obtaining a business identification number (NIB) through the Online Single Submission (OSS) system, preparing the Articles of Association, obtaining a notarial deed, and registering with the Ministry of Law and Human Rights. Additionally, foreign investors must adhere to the Negative Investment List (DNI) to determine the sectors open for foreign investment and any specific conditions or restrictions

Can there be more than one line of business for a company in Indonesia?

Yes, a company in Indonesia can operate multiple lines of business. Each line of business must be listed in the company’s deed and registered with the relevant authorities. The classification of business activities is regulated by the Indonesian Standard Industrial Classification (KBLI) 2020, which provides detailed information on the codes and descriptions of permissible business activities.

Is there any minimum capital required to establish an LLC (Limited Liability Company) in Indonesia?

According to Law Number 6 of 2023, there is no mandatory minimum capital requirement to establish an LLC in Indonesia. However, it is stipulated that at least 25% of the authorized capital must be issued and fully paid up at the time of establishment. This provision ensures that the company has sufficient initial capital to support its operations

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