What Are the Popular Types of Companies Available for Businesses in Indonesia?
Indonesia is the world’s fourth most populous nation and the largest economy in Southeast Asia, consistently ranking among the top destinations for foreign direct investment in the ASEAN region. Before entering this market, understanding the types of companies in Indonesia and selecting the correct Indonesia company structure is one of the most consequential decisions an investor or entrepreneur will make.
Indonesian commercial law, primarily governed by Law No. 40 of 2007 on Limited Liability Companies and Law No. 25 of 2007 on Investment, recognises several distinct types of business entities in Indonesia, each carrying different implications for ownership, liability, permissible business activities, capital requirements, and regulatory compliance.
This resource provides a structured, authoritative reference to all recognised business entity types available in Indonesia, updated to reflect Government Regulation No. 28 of 2025 and BKPM Regulation No. 5 of 2025, which introduced significant changes to foreign investment capital thresholds effective October 2025.
How Indonesian Business Entities Are Classified?
The Indonesian regulatory framework classifies business entities in Indonesia into two broad ownership categories:
- Privately Owned Enterprises (Badan Usaha Milik Swasta / BUMS)
These include all entities owned by private individuals or corporations, domestic or foreign. The three main legal forms are the Limited Liability Company (PT), the Limited Partnership (CV), and the General Partnership (Firma/FA).
- State-Owned Enterprises (Badan Usaha Milik Negara / BUMN)
These are entities in which the Indonesian government holds a majority or full ownership stake, operating under a separate regulatory framework administered by the Ministry of State-Owned Enterprises.
Within privately owned structures, entities are further classified by investment origin:
- PT PMDN: Domestic Investment Company (local ownership)
- PT PMA: Foreign Investment Company (partial or full foreign ownership)
Foreign investors may also establish a non-commercial presence through a Representative Office (KPPA) without incorporating a separate legal entity.
Comparison of the Main Types of Business Entities in Indonesia
The table below provides a comparative overview of the primary types of business entities in Indonesia, including ownership restrictions, capital requirements, operational scope, and their most common commercial applications.
| Entity Type | Legal Name | Foreign Ownership | Min. Paid-Up Capital | Revenue Generation | Best Suited For |
| Foreign Investment Co. | PT PMA | Up to 100% (sector-dependent) | IDR 2.5 billion | Yes | Foreign investors seeking full commercial operations |
| Local Limited Liability Co. | PT PMDN | 0% (locals only) | IDR 50 million – IDR 10 billion+ | Yes | Indonesian entrepreneurs and businesses |
| Representative Office | KPPA | No conditions | None | No | Market research, liaison, and pre-market entry |
| Limited Partnership | CV | 0% (locals only) | None (no minimum) | Yes | Small domestic businesses, SMEs |
| General Partnership | Firma (FA) | 0% (locals only) | None (no minimum) | Yes | Professional services partnerships (domestic) |
| Sole Proprietorship | UD / Usaha Dagang | 0% (locals only) | None (no minimum) | Yes | Individual micro-business operators |
| State-Owned Enterprise | BUMN (Persero/Perum) | Government-owned | N/A | Varies | Public interest + commercial functions |
What Business Venture Options Are Available for Foreign Investors in Indonesia?
You may have heard about Indonesia’s Negative Investment List before. The essential document states the industries in which foreign investors have limited or no opportunities to do business. If the trade industry you wish to venture into is not in the list, you have high hopes of owning the company in totality. Otherwise, you may incorporate a company with specific shares between you and a local partner. There is also another standard option, which is the representative office. Though it has a low start-up, representative offices act only as promotional and communications offices to the parent organisation. No business transactions are allowed. These are the common company types in Indonesia.
What Are The Types of Companies in Indonesia?
1. Foreign Investment Company: PT PMA
The PT PMA is the primary type of company in Indonesia available to foreign investors seeking a full commercial presence. It is a separate legal entity incorporated under Indonesian law, granting shareholders limited liability and the right to generate revenue, hire employees, including foreign nationals, and repatriate profits.
Key Particulars:
- Legal Name: Perseroan Terbatas Penanaman Modal Asing (PT PMA)
- Business Transactions: Permitted
- Permissible Activities: All commercially viable sectors as defined by Indonesia’s Positive Investment List (Presidential Regulation No. 10 of 2021, as amended)
- Foreign Ownership: Up to 100% in fully open sectors; restricted in sectors listed under the Positive Investment List
- Minimum Paid-Up Capital: IDR 2.5 billion (~USD 150,000), reduced from IDR 10 billion under BKPM Regulation No. 5 of 2025, effective October 2025
- Minimum Total Investment Plan: More than IDR 10 billion per KBLI business code per project location (excluding land and buildings), to be progressively realised within 3 years
- Corporate Structure: Minimum 2 shareholders (individuals or entities, foreign or mixed), 1 resident director, 1 commissioner
- Virtual Office: Conditionally permitted (subject to business activity and regional regulation)
- Licensing Framework: Processed through the OSS system under the Risk-Based Licensing (OSS-RBA) framework per Government Regulation No. 28 of 2025
Regulatory Advantages:
- Legally authorised to generate revenue and enter commercial contracts
- Eligible to hire foreign national (expatriate) employees under a valid KITAS work permit
- Classified as a large-scale business, granting access to broader market segments
- Eligible to hold property rights under Right to Build (HGB) and Right to Use (Hak Pakai) titles
Limitations:
- Certain business sectors remain restricted or closed to foreign ownership under the Positive Investment List
- Quarterly Investment Activity Reports (LKPM) are mandatory; non-compliance carries administrative sanctions, including licence suspension
- Investor KITAS (temporary stay permit) requires a minimum capital commitment of IDR 10 billion
2. Local Limited Liability Company: PT PMDN
The PT PMDN is the standard type of company in Indonesia for domestic investors. It functions as an independent legal entity, offering shareholders limited liability protection while permitting operations across virtually all business sectors without the foreign ownership restrictions applicable to PT PMAs.
Key Particulars:
- Legal Name: Perseroan Terbatas Penanaman Modal Dalam Negeri (PT PMDN)
- Business Transactions: Permitted
- Permissible Activities: All business fields, without sector restrictions
- Foreign Ownership: 0% – 100% locally owned
- Paid-Up Capital by Scale:
- Micro-enterprise: Below IDR 50 million
- Small enterprise: IDR 50 million – IDR 500 million
- Medium enterprise: IDR 500 million – IDR 10 billion
- Large enterprise: Above IDR 10 billion
- Corporate Structure: Minimum 2 local shareholders, 1 local director, 1 local commissioner (a foreign director is permitted, provided they hold an Indonesian Tax Identification Number (NPWP)
- Virtual Office: Permitted
Regulatory Advantages:
- Access to all business sectors, including those restricted under the Positive Investment List
- Lower capital thresholds and faster incorporation timelines relative to PT PMA
- Eligible for conversion to PT PMA where foreign investment is subsequently introduced
Limitations:
- No direct foreign equity ownership permitted
- Foreign nationals acting as directors require a valid NPWP and KITAS
3. Representative Office: KPPA
The KPPA is a non-commercial business structure that permits a foreign parent company to establish a limited operational presence in Indonesia without incorporating a separate legal entity. It is the most appropriate structure for companies in the market research, assessment, or pre-entry phase of their Indonesia expansion strategy.
Key Particulars:
- Legal Name: Kantor Perwakilan Perusahaan Asing (KPPA)
- Business Transactions: Not permitted
- Permissible Activities: Market research, corporate communications, coordination with local partners, and liaison activities on behalf of the parent company
- Minimum Capital: None required
- Validity Period: Maximum 3 years per licence, renewable (subject to applicable regulation)
- Virtual Office: Permitted
Regulatory Advantages:
- No minimum capital requirement
- Lower administrative burden and faster establishment
- Suitable for testing market conditions prior to full incorporation
Limitations:
- Strictly prohibited from generating revenue, signing commercial contracts, or invoicing clients in Indonesia
- Cannot employ local staff in revenue-generating roles
- Does not constitute a separate legal entity; legal accountability rests with the parent company
What Are the Lesser-Known Company Types in Indonesia?
The lesser-known company types in Indonesia are State Owned Companies, also known as BUMN in the Indonesian language. The government can wholly or partially own them. There are two types of State-owned companies in Indonesia, namely, Public Company and Limited Liability Company. A public company serves to make a profit while serving the public. A liability company is a commercial company providing services to the public at large. While the state owns a public company’s shares, a liability company’s capital comes from state assets.
How Do Businesses Choose the Right Type of Company to Set Up in Indonesia?
Selecting the appropriate type of business entity in Indonesia requires careful analysis of four core factors:
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Ownership Eligibility
Foreign nationals may only directly hold equity in a PT PMA. All other commercially active entity types are restricted to Indonesian nationals. Foreign investors wishing to access restricted sectors must engage a local partner and structure ownership accordingly.
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Business Activity and Sector
The Positive Investment List (Presidential Regulation No. 10 of 2021) governs which sectors are open, restricted, or closed to foreign investment. All business activities are classified under the KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) coding system; correct KBLI selection is essential for licensing compliance.
-
Capital Commitment
PT PMA requires a minimum total investment plan exceeding IDR 10 billion per KBLI code, with a minimum paid-up capital of IDR 2.5 billion (per BKPM Regulation No. 5 of 2025). Domestic entities such as PT PMDN, CV, and Firma carry no such federal floor, though sector-specific licences may impose additional thresholds.
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Operational Scope
Representative offices are strictly non-commercial. PT structures both PMA and PMDN are required for any revenue-generating, contracting, or invoicing activities within Indonesian territory.
Why Choose 3E Accounting for the Right Company Structure In Indonesia?
Indonesia’s regulatory framework offers a well-defined range of types of business entities designed to accommodate investors and entrepreneurs of varying scales, origins, and commercial objectives. Whether you are a foreign investor evaluating a PT PMA under the updated 2025 BKPM capital framework, a domestic entrepreneur considering a PT PMDN, or a multinational conducting a preliminary market assessment through a KPPA, understanding the legal distinctions between each type of company in Indonesia is foundational to a compliant and commercially viable market entry.
3E Accounting Indonesia gives professional assistance with company incorporation, taxation, licensing, and ongoing compliance across all recognised types of companies in Indonesia. Our experienced team provides practical and regulation-current guidance to help businesses establish the most suitable Indonesia company structure efficiently and in full compliance with Indonesian law.
