Common Mistakes Businesses Must Avoid When Starting a Company in Indonesia

Indonesia is Southeast Asia’s largest economy, offering over 270 million potential customers and diverse growth sectors. Yet, many foreign businesses fail not because of market potential, but due to costly setup mistakes. Avoiding these pitfalls can mean the difference between a smooth launch and legal or financial disaster.

Also read: Top Questions Foreigners Ask Before Registering a Business in Indonesia

1. Choosing the Wrong Business Structure

The most frequent error is selecting the wrong legal entity. For foreign investors, the PT PMA is the standard structure, allowing up to 100% foreign ownership in eligible sectors. Using an unsuitable setup or informal arrangement risks violating investment laws and losing operational rights.

Your KBLI classification determines sector-specific ownership rules. A mismatch between your KBLI and your activities can invalidate licenses and delay operations.

Also read: The Types of Companies and Business Entities in Indonesia

2. Ignoring Capital and Documentation Rules

PT PMAs are required to fulfill minimum investment obligations, IDR 10 billion for each KBLI code and location. Underestimating this or mixing personal and business funds can lead to rejections or compliance breaches.

Incomplete or incorrect documents — such as NPWP (tax ID), domicile letters, and sectoral permits — are another common stumbling block.

3. Mishandling Licensing via OSS-RBA

The OSS-RBA system classifies businesses by risk level and dictates licensing needs. Mistakes in data entry, misunderstanding requirements, or skipping sectoral permits (like environmental or fire safety approvals) can cause delays or shutdowns.

Also read: What Happens If You Operate a Business in Indonesia Without a Proper License?

4. Visa and Work Permit Violations

Conducting business activities on a tourist visa is a serious legal offense. You need the correct Investor KITAS or work permit before engaging in any activity. Misaligned job titles, unregistered dependents, or expired permits can lead to deportation.

Also read: Indonesian Work Visa: The Requirements and Process

5. Neglecting Labor and Social Security Compliance

Employers must enroll local employees in BPJS Kesehatan and BPJS Ketenagakerjaan. Misclassifying workers as contractors or failing to pay monthly contributions can lead to fines or suspension of the business license.

6. Underestimating Cultural and Bureaucratic Realities

Success in Indonesia often depends on local relationships and cultural respect. Ignoring community norms or trying to rush bureaucratic processes can backfire, resulting in resistance from authorities or business partners.

7. Relying on Unqualified Advisors

Cheap or informal agents may cut corners, register improper structures, or mishandle documents. Always use licensed and experienced corporate service providers.

How to Avoid These Pitfalls

• Match your business structure and KBLI code precisely to your activities.
• Meet or exceed capital requirements.
• Use the OSS-RBA system correctly, securing all necessary permits.
• Get the right visa and work permits before operating.
• Stay compliant with BPJS, tax filings, and other ongoing obligations.
• Build strong local networks and adapt to cultural norms.
• Work with trusted advisors who understand Indonesian law and regulations.

Also read: 10 Challenges of Doing Business in Indonesia

Why InvestinAsia Is the Safer Route to Company Setup

Navigating Indonesia’s legal, financial, and cultural landscape can overwhelm even seasoned entrepreneurs. InvestinAsia provides end-to-end Indonesia company registration services, ensuring your PT PMA is set up correctly, your licenses are secured, and your compliance is maintained from day one. With local expertise and a proven track record, we help you avoid the mistakes that derail many foreign ventures — saving you time, money, and stress.

We also provide other services such as:

• PMA registration in Indonesia (Foreign Company)
• Representative office registration in Indonesia
• Indonesia Local PT PMDN Set Up
• Indonesian Virtual office setup
• Business registration number in Indonesia
• Business Licenses in Indonesia
• Trademark Registration in Indonesia
• Franchise License in Indonesia

If you are interested in starting a business in Indonesia, you can start by contacting us for FREE consultation.

FAQs

What is the most common mistake when starting a company in Indonesia?

Choosing the wrong legal structure or KBLI classification, which can invalidate licenses and delay operations.

Is it possible to operate a business in Indonesia without establishing a PT PMA?

Only in specific cases. Most foreign-owned operations require a PT PMA to comply with investment laws.

Am I required to register for BPJS if I do not employ any local staff?

No, BPJS registration is only mandatory if you employ Indonesian nationals.

What happens if I start operating before getting my licenses?

You risk fines, shutdowns, and legal action from Indonesian authorities.