Exploring Different Types of Business Structures in Indonesia
Indonesia’s business structures and economic growth is moving at a fast pace, thanks to the country’s stretch of islands.
Being a member of the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) has helped Indonesia get more attention from across the world.
The dynamic and ever-growing nature of the country’s economy also created the opportunity for many local businesses to thrive.
For an economy that is consistently experiencing a 5% growth in the economy every year for the past decade, it’s not surprising to see lots of foreign investors ready to explore the country’s business opportunity.
Incorporating in Indonesia is no child’s play. There are certain business structures in Indonesia that companies and organizations need to understand.
Having prior knowledge of these types of business structures in Indonesia, including its benefits and downsides, will help you make an informed decision for your upcoming business.
Let’s delve more into the different types of business structures in Indonesia.
Limited Liability Company (Perseroan Terbatas)
In this structure, the company’s wealth and assets are different from the personal assets of the owner.
The Limited Liability Company in Indonesia typically operates on capital shares.
And the most important thing is the separation between the company’s asset and the owner’s asset. This way, the owner is completely not responsible for any breach in the company’s finance.
Hence, limited responsibilities of shareholders. The stipulated conditions determine profits distributed through dividends. However, this business structure is mostly popular among foreign companies.
In Indonesia, a PT must have at least one commissioner, one director, and two shareholders who are Indonesia natives.
What Are the Distinctions Between PTs
The company law in Indonesia introduced some distinctions between PTs or limited liability companies. Have a look at them:
The required share capital to set up a micro company in Indonesia is at least INR 50 million. The INR 300 million maximum annual income is something a prospective PT must take note of.
The expected minimum share capital for small companies is between INR 50-500 million. And the expected annual income to fall between INR 300 million and INR 2.5 billion.
The share capital of a medium company must be between INR 500 million and INR 10 billion. The expected annual turnover range is INR 2.5-50 billion.
The net share capital of a large company in Indonesians expected to sit right above INR 10 billion along with an INR 50 billion annual incomes.
Foreign-owned Limited Liability (Penanaman Modal Asing)
This is an Indonesian business structure that refers to Indonesia’s limited liability company that owned and managed by foreigners.
You must get approval from local authorities before running a limited liability company (Penanaman Model Asing (PMA) in Indonesia.
The Capital investment coordinating board is responsible for approving the OMA business. To get full approval, your PMA business must satisfy the following conditions:
- Your company must provide valid proof of stakeholders plan to invest at least US $1.2 million
- Be ready to pay 25% of the investment plan
- In addition, the foreign company must have limited liability.
- Minimum of one resident director
- One commissioner
- Two shareholders
PMAs must account for the sales of a minimum of 5% of their share to a local Indonesia citizen in its first 15 years of establishment. To avoid this a company must start a joint venture with Indonesia.
Nominee Limited Liability
Nominee’s limited liability a structure used by foreign investors to bypass the PMA stringent rules.
This structure allows an Indonesia citizen to set up a limited liability company on behalf of their foreign investors.
Apart from bypassing the foreign investment restrictions, the process of getting started with the Nominee limited liability company is quicker. Other business structures in Indonesia include the representative office, which is created for promotional activities, market research, or buying/selling middleman for the parent company. Their operating license only lasts for two years.
3E Accounting is Your One-stop Solution
Indonesia is blessed with lots of skilled workers & numerous trading opportunities. At 3E Accounting, we are your go-to when you want to do business in Indonesia.
Our Indonesia incorporation agency provides different market entry services created to support your new business.
Reach out to us via email or phone call today! Our friendly customer care team will be happy to listen to your inquiries, guide you through the business structures in Indonesia, and help you make an informed decision.