Indonesia’s rapidly growing economy offers numerous opportunities for investors seeking to establish their businesses in the country. Nevertheless, the diverse range of business structures and regulations in Indonesia can be perplexing. In this article, we will show you a detailed overview of the different types of companies in Indonesia.
The three most common types of business entities in Indonesia are state-owned companies (BUMN), private-owned companies (BUMS), and representative companies. This guide of types of companies in Indonesia hopefully can well-informed you to decide on what kind of business you want to establish here.
State-Owned Company (BUMN)
The first type of company in Indonesia are State-owned company or state-owned enterprises (SOEs). It is a type of company in Indonesia where the government is partially or entirely involved. The government became the main shareholder of the SOEs. Known as BUMN (Badan Usaha Milik Negara) in Indonesian terms, this business entity plays a significant role in the growth of the national economy.
There are two types of state-owned companies: PERUM and PERSERO.
Public Company (PERUM)
PERUM, known as a public company, is a state-owned enterprise. This business type belongs to the government as it dominates the company’s capital.
The main purpose is to generate profits by providing services and/or goods to the public. Besides, the workers in PERUM are regarded as civil servants.
Liability Company (PERSERO)
PERSERO (liability company) are companies in Indonesia that receive their capital from assets separated from the state, either wholly or partially. The most common way of providing capital is through shares or stocks.
The main objective of these companies is to generate socioeconomic benefits, which may include making profits and contributing to public benefits. Even though it is a state-owned company, its workers are regarded as private employees.
Private-Owned Company (BUMS)
The next type of business entities in Indonesia are Badan Usaha Milik Swasta or BUMS (Private-Owned Company).
Established by individuals or a group of private shareholders (founder), a Private-Owned Company shares the profits earned by the company. Three types of companies fall into this classification: Firma (Fa), Commanditaire Vennootschap (CV), and Company Limited (PT).
This type of company in Indonesia is formed through a partnership where two or more people collaborate to conduct business. Each member is accountable for the company’s obligations. The capital is acquired from submitting some or all of the personal possessions.
The advantages of a firm are:
- It offers greater financial capability.
- The decisions are made jointly, leading to better decision-making. (read more: What is Joint Venture?)
- The labor is distributed among members according to their skills and expertise.
- It has clear legal status.
On the other hand, establishing a firm also comes with drawbacks, such as:
- The internal conflict between members has the potential to jeopardize the survival of the company.
- Once the member left, the firm could possibly disband.
Also read: 12 Pro Tips for Choosing Your Company Name
Commanditaire Vennootschap (CV)
This business entity consists of 2 or more people as partners – a managing partner (active partner) and a limited partner (silent partner). The active partner has the responsibility to manage running the business as well as providing the capital.
Meanwhile, a silent partner is generally the venture capitalist that provides the capital for the company. They do not manage the company, and the responsibility is limited only to the capital.
A CV offers benefits such as:
- Easy to set up
- Has the potential to acquire a significant amount of capital
- The ability to access higher levels of credit
- Has a greater opportunity for expansion.
The disadvantages of a CV are:
- The liability of the general partners is not restricted.
- The chance of survival is not guaranteed.
- It is not easy to withdraw the investment.
Limited Company (PT/ Perseroan Terbatas)
A limited company or Perseroan Terbatas (PT) is the dominant type of business structure in Indonesia. The capital of this business entity is separated into shares. The responsibility for the company’s debts and liabilities is restricted to the owners of the holdings.
Establishing a PT requires 1 resident director, 2 shareholders, and 1 commissioner.
There are two types of PT such as PT PMDN (Local Limited Liability Company) and PT PMA (Foreign Limited Liability Company)
This type of company in Indonesia is also called local limited liability company. A local company requires a whole domestic team consisting of 1 local commissioner, 2 local shareholders, and 1 local director (it can be a foreign director, but they must have a tax ID or NPWP in Bahasa. (read more: what is NPWP Indonesia)
This company is commonly found in Indonesia. Moreover, the structure and function are almost identical to limited liability companies. Compared to foreign companies, this business entity has bigger opportunities to operate business activities. It falls into three types of categories based on the estimated investment value: small, medium, and large companies.
Another benefit of local companies is that it is permitted to utilize virtual offices for their business. Visit our service page for further information about registering PT Company in Indonesia.
A foreign company or PMA (Penanaman Modal Asing) is established and operated by foreign investors in Indonesia. To set up a foreign company, it needs: 1 local/ foreign commissioner, 1 local/foreign director, and 2 local/foreign shareholders. Similar to PT PMDN, the requirement for a foreign director must have a tax ID.
Depending on the business scope, foreign investors can own the company either wholly or partially. Regardless of the number of shares, when foreign investors are involved as shareholders, it should be registered as PT PMA. PT PMA is generally considered a large-sized company because the minimum investment value is 10 billion Indonesian rupiahs.
You can contact us if you need professional help to set up a PMA company in Indonesia.
Representative offices are free to operate in any business field without constraints on foreign ownership or minimum capital. However, they are not permitted to produce earnings but can only participate in advertising and market research activities as well as company communication with Indonesian investors.
A representative office has some types, such as KPPA Migas, KP3A, and BUJKA. Foreigners who want to do local market research on promotional-related activities are recommended to seek proficient service providers to assist with the registration process. Visit our site for further information about setting up representative office in Indonesia.
You can also read a more detailed article about the differences between PT vs PMA vs KPPA Company in Indonesia.
That is all the detailed overview of types of business structures in Indonesia. The business structure in Indonesia is varied. It covers state-owned companies (Perum and Persero), private-owned companies (Fa, CV, and PT), and representative companies. Hopefully, this article can be a great resource for anyone looking to learn about the business type in Indonesia. Give a visit to our page if you are curious to learn more about Indonesia Company Registration.
Not only that, we also provides Indonesian business visa services for you.
So, what are you waiting for? Contact us now for further informations!