What are The Different Types of Business Entities You Can Set Up in Indonesia?
Indonesia enters 2026 with stable macroeconomic conditions that support business planning, though they remain overshadowed by global uncertainty. Moderate economic growth, controlled inflation, and policy continuity provide a constructive foundation for businesses.
While there are several types of business entities to set up in Indonesia, three options remain the most popular among foreign investors: foreign investment company (“PMA”), local company (“Local PT”)and foreign representative office (“Rep Office”).
The Indonesian government recognises the importance of foreign investment in the country. As such, they are continuously trying to make the setup process as easy as possible. Part of those efforts includes minimising the bureaucracy and introducing a wider scope of activities.
Among the measures that have been taken in order to encourage foreign investment are:
- Regional incentives
- Industry incentives
- Tax concessions
- Free trade zones
Popular Types of Business Entities in Indonesia
Business entities in Indonesia are divided into two main categories: legal entities and non-legal entities.
1. Legal Entities
a. PT / limited liability company
This type of legal entity constitutes an alliance of capital established pursuant to a contract to carry on business activities with authorised capital which is divided into shares and which fulfils the requirements stipulated in the Act and its implementing regulations. There were 2 types of PT:
- PT PMA (Foreign Limited Liability Company)
– Allows 100% foreign ownership (subject to sector restrictions)
– Maximum ownership depends on the business sector and activities.
– Regulated by the Indonesian Negative Investment List
– Minimum paid-up capital: IDR 10 billion
– Includes authorised capital to open a local bank account - Local PT (Indonesian Owned)
– Only 100% local ownership allowed; foreign investors may participate through a nominee arrangement
– No minimum capital required
– Authorised capital depends on company size:- Small: IDR 51 million – IDR 500 million
- Medium: IDR 500 million – IDR 10 billion
- Large: >IDR 10 billion
- Small: IDR 51 million – IDR 500 million
If you’re not ready for full operations, a Rep Office is a good option. There are 2 types of Rep Office:
1. Foreign Representative Office (KPPA)
- Branch of the parent company
- Focused on marketing and market research
- Cannot generate revenue or conduct direct sales
- No minimum capital
- Requires KPPA License
2. Foreign Trade Company Representative Office (KP3A)
- Promotes certain products and conducts market research
- Acts as a “selling agent” for the parent company
- Cannot perform sales transactions, submit tenders, or sign contracts
- Requires a trading license (SIUP3A)
b. Foundation / Yayasan
A foundation is a legal entity consisting of assets separated and destined to achieve certain objectives in the social, religious and humanitarian fields which do not have members.
c. Cooperative / Koperasi
A business entity consisting of individuals or cooperative legal entities, based on the principle of cooperatives, as well as a people’s economic movement based on the principle of kinship.
Business type that were non-legal entity:
- Persekutuan Perdata / Civil Partnership
An agreement whereby two or more people commit themselves to include something in a partnership with a view to sharing the profits that result from it; - CV(Commanditaire Venootschnap / Limited Partnership)
Consists of active pesero and pasif pesero. Active Pesero is responsible for personal property, whereas passive Pesero is only responsible for the amount of capital that has been deposited in the CV. - Firma / General Partnership
A company established to conduct business under one common name. Members have joint responsibilities towards the firm.
The following are the types of business entities in Indonesia as in general:
1) BUMN (State-Owned Enterprise)
BUMN is actually a business entity owned by the state and takes care of vital interests in people’s lives. BUMN is an important asset owned by the state, especially in terms of income of state money. At present the BUMN is divided into three business entities namely:
a. Perjan
Perjan is a form of BUMN in which all capital belongs to the government without exception. This business entity focuses on community service. Example: PT KAI
b. Public Corporation
A corporation, owned and operated by a government, established for the administration of certain public programs.
c. Persero
The form of BUMN that focuses on seeking profit or maximum profitability by providing services for the public interest. For example Jasa Raharja, PT BRI, PT Telkom and others.
2) BUMS (Private-Owned Enterprises)
a. Firma (General Partnership)
A Firma is a business owned by two or more partners under a common name, with joint responsibility for debts. It is ideal for small-scale businesses with active partner involvement. However, all partners are personally liable for business obligations.
b. CV (Limited Partnership / Commanditaire Vennootschap)
A CV has active partners who manage the business and are fully liable, and passive partners who contribute capital with limited liability. It allows investors to fund the business without participating in operations. This structure suits medium-sized ventures with defined roles.
c. PT (Limited Liability Company / Perseroan Terbatas)
A PT offers limited liability protection to shareholders, separating personal assets from business debts. It can be locally owned (Local PT) or foreign-owned (PT PMA) and supports full-scale operations.
3) Cooperative
a. Consumption Cooperative
A consumption cooperative provides goods and services to its members at lower costs, helping them save money and access essential products efficiently.
b. Credit Cooperative
A credit cooperative offers financial services such as loans and savings facilities to its members, promoting financial inclusion and supporting community development.
c. Service Cooperative
A service cooperative delivers specific services, such as transportation, healthcare, or education, to meet the collective needs of its members.
d. Production Cooperative
A production cooperative organises members to produce goods or products collectively, sharing profits and resources among all participants.
e. All-Round Cooperative
An all-round cooperative combines multiple activities, including consumption, credit, service, and production, to address the diverse needs of its members.
Foreign investment is only possible with PT and a Rep Office.
What Are the Pros and Cons of Privately Owned Companies?
The main reason investors choose a certain type of entity is for the advantages that the entity can offer.
| Entity | Pros | Cons |
| Sole Proprietorship (Perusahaan Perorangan) | Simple to establish and dissolve. Minimal legal restrictions are involved. You have the freedom to decide what minimum capital to pay. The best option if your start-up has a small capital to work with. Easy transfer of ownership whenever you want. The owner is the only one who enjoys the benefits. | Smaller profits compared to owning larger entities. The owner bears the losses and debts that may be incurred. |
| Commanditaire Venootschnap (Limited Liability Partnership) | Easy to establish. Greater potential for expansion. Better credibility. Several partners mean larger capital. Getting loans is easier. | Uncertainty when it comes to the survival rate of the business. Withdrawing your deposited capital is difficult. Responsibilities among partners might not always be fair. |
| Firma (FA) | A permanent entity. Better expansion opportunity. Better financial stability because of the large initial capital. Staff can be categorised based on their skills and experience. | New partners are only allowed with the consent of all existing partners. Every partner must be responsible for debt payments using their personal property. Any internal conflict between involved partners could threaten the survival of the company. |
Ready to Start Your Indonesian Business Dream?
Let 3E Accounting help you decide on the best business entity. For more information about our Indonesia Company Incorporation Services, contact us today.
