What is the Smartest Way to Incorporate Your Business in Indonesia in 2026?

 

What are the Types of Business Structures in Indonesia?

Entrepreneurs have multiple legal structures to choose from when registering a business in Indonesia. The most suitable structure often depends on whether the business is foreign- or locally owned and what the operational goals are. The common entity types include:

 

PT (Perseroan Terbatas) – Local Limited Liability Company

This is the go-to option for Indonesian citizens and businesses.

Requirements

• Requires at least two shareholders (individuals or entities).
• There must be one director and one commissioner.
• It should be entirely owned by Indonesians.
• There is limited liability protection for shareholders.

It is ideal for a broad range of domestic commercial activities.

 

PT PMA (Foreign-Owned Company)

This structure allows foreign nationals or companies to hold partial or full ownership in Indonesian enterprises, based on the Positive Investment List.

• Minimum authorized capital: approx. IDR 10 billion.
• Must operate in sectors approved for foreign investment.
• Permits foreign shareholding, foreign staff hiring, and profit repatriation.

This structure is suitable for international businesses and joint ventures.

 

CV (Commanditaire Vennootschap) – Limited Partnership

This entity is often used by SMEs, a CV is a simple partnership structure.

• It consists of active and silent partners.
• It is not considered a separate legal entity, so partners may be personally liable.

It is easier to set up, but best suited for small-scale operations.

 

Representative Offices

This entity is ideal for market research or brand promotion without direct sales activity.

Types include:

• General Representative Office (KPPA)
• Trading Representative Office (KP3A)
• Construction Representative Office (BUJKA)

These do not generate revenue and are used primarily for liaison purposes.

 

How to Incorporate Your Business in Indonesia in 2026?

If you are ready to start your business in Indonesia, here are the essential steps involved:

 

1. Select a Company Name

Your business name must contain at least three unique words. While local companies are required to use the Indonesian language, foreign-owned companies (PT PMA) are allowed to use names in English or other foreign languages.

To reserve the name, submit an application through the Ministry of Law and Human Rights’ Legal Entity Information System.

 

2. Appoint Key Company Personnel

Indonesian law requires at least two shareholders, one director, and one commissioner. While local companies must have Indonesian shareholders, PT PMAs allow foreign ownership.

 

3. Prepare and Submit Legal Documents

With the help of a notary, draft the Articles of Association, which should include:

• Capital structure (authorized, issued, and paid-up)
• Company objectives
• Registered office address
• Board structure
• Shareholder rights and obligations
• Incorporation period

These documents must be signed by all shareholders and submitted to the Ministry of Law and Human Rights for approval.

 

4. Obtain a Domicile Letter

Outside Jakarta, businesses must get a domicile certificate from the local district government (Surat Keterangan Domisili Perusahaan) to confirm the company’s registered address.

 

5. Register for a Taxpayer ID (NPWP)

A company must register with the Indonesian Tax Office to obtain a Taxpayer Identification Number (NPWP), which is necessary for tax reporting, license applications, and opening a corporate bank account.

 

6. Apply for a Business Identification Number (NIB)

Register through the OSS (Online Single Submission) platform to get your NIB. This 13-digit number acts as your company’s unique identifier and is mandatory for securing operational permits and conducting lawful business activities.

 

What are the Key Considerations Before You Incorporate Your Business in Indonesia?

Foreign-owned companies (PT PMA) must show a minimum authorized capital of IDR 10 billion (approx. USD 650,000) to cover operational activity. Not all of it needs to be deposited upfront, but the commitment must be documented.

 

Directors and Shareholders:

• Minimum 2 shareholders (individuals or entities), it is advisable to have one local director for tractability of administration. 
• Director is responsible for day to day operations of the company. 
• 1 director and 1 commissioner required.
• Foreign directors need valid work permits (KITAS).

 

Business Address:

Your company must have a physical office in a properly zoned area. Some regions allow virtual offices under specific conditions.
 

What are Some Common Advantages of Company Incorporation in Indonesia?

Establishing a company in Indonesia comes with several advantages:

 

1. Access to Trade Agreements

Indonesia’s participation in regional trade blocs opens up export opportunities and tax advantages with countries like India, China, Japan, South Korea, Australia, and New Zealand.

 

2. Land Rights for Foreigners

Foreign investors are permitted to hold land under certain titles: Right to Build (HGB), Right to Use (Hak Pakai), and Right to Cultivate (HGU).

 

3. English-Friendly Business Environment

In business hubs such as Jakarta, English is widely used, making it easier for foreign entrepreneurs to operate.

 

4. Wider Industry Access

Indonesia has relaxed its Negative Investment List, enabling foreign ownership in a broader range of sectors, especially those needing capital and technological input.

 

5. Rising Middle Class

With a projected middle class of 90 million people by 2030, Indonesia presents a growing demand in areas like consumer goods, retail, healthcare, and education.

Indonesia is an increasingly attractive destination for business expansion because of its economic resilience, regulatory reforms, and location. Whether you are setting up a new venture or expanding an existing business, understanding and complying with Indonesia’s incorporation process is crucial for long-term success.
 

What is a Risk-Based Regulation?

Under Government Regulation No. 5 of 2021, introduced through the Omnibus Law, Indonesia has changed how business licenses are issued. Instead of a standard process for all, licenses are now given based on how risky a business activity is.

 

How the Risk-Based System Works

Before giving a license, the government will assess the risk level of each business. This process includes:

• Identifying the type of business activity
• Checking the possible hazards
• Looking at how likely those hazards are to happen
• Rating the risk level and size of the business
• Deciding what kind of license is needed

 

Business Categories by Risk

After the analysis, businesses will fall into one of four risk groups:

• Low Risk
• Medium-Low Risk
• Medium-High Risk
• High Risk

The lower the risk, the easier and faster it is to get a license.

 

Sectors Covered:

This system applies to many sectors, including:

• Fisheries and Maritime
• Agriculture
• Environment and Forestry
• Energy and Minerals
• Nuclear
• Manufacturing and Industry
• Trade and Commerce
• Housing and Public Works
• Transport
• Health, Food, and Medicine
• Education and Culture
• Tourism
• Religious Affairs
• Telecom, Broadcasting, and Digital Services
• Defense
• Employment 

 

What do you Need to Get a Business License in Indonesia?

The documents and approvals you need depend on how risky your business activity is. Companies in higher-risk sectors must complete more steps and get more licenses.

 
The first step for all businesses is getting a Business Identification Number (NIB) through Indonesia’s Online Single Submission (OSS) system. To apply for an NIB, businesses must submit the following:

• Taxpayer Identification Number (NPWP- Nomor Pokok Wajib Pajak)
• Business classification code based on KBLI
• Company profile
• Details about the capital ownership
• Planned business address

 

The OSS platform is connected to multiple government bodies, including the Ministry of Finance, Ministry of Home Affairs, and Ministry of Law and Human Rights.

 

Low-Risk Businesses

Businesses considered low-risk only need an NIB to start. The NIB functions as:

• The company’s official identity
• Importer registration number
• Registration for the national social security program

 

Medium-Low Risk Businesses

These businesses must obtain:

• An NIB
• A Certificate of Standards, which shows they meet certain business or product norms

The certificate is issued through the OSS system and is a requirement before the business begins operating.

The NIB allows businesses to carry out activities in both the preparation and commercial phases.

 

Preparation phase includes:

• Buying equipment or tools
• Securing land
• Hiring staff
• Conducting feasibility analysis
• Arranging project funding

 

Commercial phase includes:

• Manufacturing or offering services
• Shipping and distribution
• Sales and marketing
• Other income-generating activities

 

Medium-High Risk Businesses

For this category, a company must get both:

• An NIB
• A Certificate of Standards that must be validated by either central or regional authorities

If the certificate is not yet verified, the company can only operate in the preparation stage.

 

High-Risk Businesses

High-risk sectors require:

• An NIB
• An Operating License issued after the government verifies all conditions are met, which might include an environmental impact assessment

Although the full license is needed to operate commercially, the NIB still allows them to carry out preparatory activities.

 

Brief Steps to Obtain a Business License:

Once the government confirms that all required standards are met, the certificate is officially validated, allowing the company to enter the commercial stage.

1. Register your company and obtain a Taxpayer Identification Number (NPWP).
2. Apply for a Business Identification Number (NIB) via the OSS system.
3. Submit required documents such as company profile, capital details, and business classification code (KBLI).
4. Depending on your business risk level:

• Low-risk: NIB is sufficient.
• Medium-low: Obtain a Certificate of Standards via OSS.
• Medium-high: Certificate of Standards must be validated by authorities.
• High-risk: Secure an Operating License after meeting all requirements, including potential environmental assessments.

 
The level of licensing required depends on how risky your business activity is. Higher-risk businesses must go through more steps and obtain additional permits.
 

Conclusion

With the right structure, proper documentation, and compliance with Indonesia’s risk-based licensing regulations, your business can establish a strong and profitable presence.

Indonesia’s evolving regulatory landscape offers opportunities, provided you take an informed approach. From choosing the correct entity (like PT or PT PMA) to securing the necessary licenses via the OSS platform, every step plays a crucial role in your long-term success. Start strong by doing it smart.