Indonesia offers a diverse range of business structures to suit different operational needs, from solo entrepreneurs to corporations. Choosing the correct business entity in Indonesia is essential, as it impacts liability, taxation, ownership rules, and operational flexibility.
In this guide, we’ll walk you through the five most common types of companies in Indonesia, explain what each structure means, and help you understand their advantages and suitability.
How Many Types of Business Structures Are There in Indonesia?
There are five main types of business entities in Indonesia recognized by the government and registered through the Indonesian company registry:
- Perseroan Terbatas (PT) – Limited liability company (local and foreign variants)
- Commanditaire Vennootschap (CV) – Limited partnership
- Usaha Dagang (UD) – Sole proprietorship
- Representative Office – For foreign companies with non-commercial operations
- Subsidiary Company – Separate legal entity, often used by parent companies
Each structure serves different business goals and legal requirements. Let’s look at them one by one.
What Is a Perseroan Terbatas (PT) in Indonesia?
A Perseroan Terbatas (PT) is a limited liability company in Indonesia, where ownership is divided into shares. Perseroan Terbatas (PT) in Indonesia is the most commonly used entity in the country and is recognized as a legal person, separate from its shareholders.
Types of Perseroan Terbatas (PT)
- Local PT: Fully owned by Indonesian citizens.
- PT PMA: A foreign-investment company (Penanaman Modal Asing).
Key Features of Perseroan Terbatas (PT)
- Limited liability for shareholders
- Structured management: Director, Commissioner, and Shareholders
- Can engage in profit-generating activities
- Must be registered with the Indonesia business entity registry
Advantages of establishing a Perseroan Terbatas (PT)
- Legal protection: Owners’ assets are safeguarded.
- Transferable shares: Ownership can change without dissolving the business.
- Credibility: Often preferred by investors and partners.
- Scalability: Suitable for businesses aiming to grow large. Capital Requirements for Local PT
A PT is the go-to structure for formal, scalable ventures and appears frequently in PT in Indonesia company names.
What Is a Commanditaire Vennootschap (CV) in Indonesia?
A Commanditaire Vennootschap (CV) is a limited partnership involving two or more individuals. It is not a separate legal entity and cannot be owned by foreigners.
Roles in a CV:
- Active Partners: Manage the business and are liable for debts.
- Silent Partners: Contribute capital but are not involved in operations.
Key Features of Commanditaire Vennootschap (CV) in Indonesia
- No minimum capital required
- Must be 100% locally owned
- Deed must be notarized and registered
Advantages of Commanditaire Vennootschap (CV) in Indonesia
- Low setup cost: Ideal for small businesses
- Simple formation: Fewer compliance obligations
- Flexible profit-sharing: Defined in the partnership deed
Limitations of Commanditaire Vennootschap (CV) in Indonesia
- Unlimited liability for active partners
- No legal separation between business and partners
- Cannot raise equity from public or foreign sources
What Is a Sole Proprietorship (UD) in Indonesia?
A Usaha Dagang (UD) is a sole proprietorship, where the business and owner are legally the same. It is the easiest and most informal business structure in Indonesia.
Key Features of Usaha Dagang (UD) in Indonesia
- Owned and managed by one individual
- No separation of assets
- Low capital requirements
Advantages of Usaha Dagang (UD) in Indonesia
- Simple registration
- Minimal reporting obligations
- Full control for the owner
Disadvantages of Usaha Dagang (UD) in Indonesia
- Unlimited liability: Owner is personally liable for debts
- Hard to scale: Not attractive for investors or lenders
Best suited for micro and small-scale operations like local shops, artisans, or freelancers.
What Is a Representative Office in Indonesia?
A representative office allows foreign companies to establish a presence in Indonesia without conducting direct commercial activities.
Types of Representative Offices in Indonesia:
- KPPA – General foreign rep office
- BUJKA – Construction sector
- KP3A – Trade and marketing
Key Features of Representative Offices in Indonesia:
- Cannot generate income
- Primarily for research, marketing, and liaison
- Valid for 2 years (renewable)
- No minimum capital requirement
Advantages of Representative Offices in Indonesia:
- Market access without full setup
- Easy entry for foreign businesses
- No taxes on income as it cannot earn revenue
Ideal for companies exploring business opportunities in Indonesia for foreigners, but not meant for operational businesses.
What Is a Subsidiary Company in Indonesia?
A subsidiary is a separate legal company owned by another company (foreign or local). It usually takes the form of a PT or PT PMA.
Key Features of Subsidiary Company in Indonesia:
- Independent from the parent company
- Must meet capital requirements
- Fully operational entity in Indonesia
Advantages of Subsidiary Company in Indonesia:
- Full operational capability
- Eligible for tax incentives
- Considered a local company for legal purposes
- Able to enter into contracts and own assets
For large firms expanding into Indonesia, this is a robust and compliant way to enter the local market.
Comparison to do while selecting the best business setup in Indonesia
While each type of company in Indonesia serves a unique purpose, it can be difficult to determine which is the most suitable for your business without seeing how they stack up against each other. The table below offers a side-by-side comparison of the five key business structures in Indonesia based on ownership, liability, revenue potential, and other critical factors. Use this overview to evaluate which structure aligns best with your operational needs, capital, and long-term goals.
Conclusion:
Understanding the types of businesses in Indonesia is vital for setting up your operations effectively. Whether you’re a solo entrepreneur or building a corporation, selecting the right structure ensures you meet legal requirements and position your company for growth.
From sole proprietorships and CVs to PT companies and subsidiaries, each has its place in the broader structure of business in Indonesia. Before registering a business in Indonesia , consult the Indonesian company registry and consider your ownership model, risk tolerance, and growth ambitions.
At 3E Accounting Indonesia, we specialise in simplifying the setting up of Indonesia company. Whether you’re registering a PT, CV, or exploring other options, our team provides expert guidance tailored to your goals.
Disclaimer: This blog is for informational purposes only and does not constitute any legal advice.
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Frequently Asked Questions
In Indonesia, “PT” stands for Perseroan Terbatas, which translates to Limited Liability Company. Once a company is registered, the official name must begin with “PT” to reflect its legal status. This prefix is mandatory and appears on all official documents, licenses, and business transactions associated with the company.
An LLC (Limited Liability Company) is a legal structure, not a tax classification. For taxation, an LLC can elect to be treated as an S Corporation, C Corporation, Partnership, or Sole Proprietorship. Therefore, an LLC may choose to be taxed as an S Corp if it meets the IRS requirements.
Yes, it is possible to establish a foreign-owned local company in Indonesia. However, in sectors restricted to local ownership, you will need to appoint a local nominee director to comply with regulatory requirements for incorporation.
Introduced in 2021, the Positive Investment List replaces the former Negative Investment List. It outlines sectors where investments are fully open, conditionally allowed, or restricted, providing clear guidance for foreign and domestic investors on where they can operate in Indonesia.
The Articles of Association are a foundational legal document that defines a company’s internal governance framework. They set out the company’s objectives, the responsibilities of directors, the procedures for decision-making, and the rules for managing financial records and other corporate affairs.
Abigail Yu
Author
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
