HomeBiz – Set Up a Home-based Business in Indonesia
3E Accounting reveals how to set up a home-based business in Indonesia for the aspiring home tycoon.
Indonesia has many things that make it an attractive place to start a business. These include a strong emerging economy, the fourth most populous country in the world and high internet penetration by a tech-savvy young population. As Southeast Asia’s largest economy, there’s plenty of demand in a large domestic market that is friendly towards investment. Working from home is now the new norm, and this makes it extremely desirable to set up a home-based business in Indonesia.
Starting Up @ Home
As of 2019, the Indonesian government has lifted the ban on entrepreneurs using their houses as business premises. This timely regulation allows micro and small businesses to operate start-ups from their homes. Entrepreneurs have been quick to capitalize on this, and there has been a rise in home-based businesses. Some of these include:
- Online or Digital Business such as dropshipping or affiliate marketing.
- Business or Tax Consultant.
- Cottage industries such as traditional guitar making, dressmaking, home-cooked food, etc.
- Freelance bookkeeping, writing, app developers, website design, etc.
If you are looking to set up a home-based business in Indonesia, there are quite a few steps that you need to consider first. A business plan is a must for all would-be entrepreneurs. Due diligence should include the business model, projected sales, financial strategy, as well as aims and objectives.
As this is a home-based activity, you will also need to consider if you have space for it. Some initial investment will be required for materials, inventory and setting up a seamless communications system. This last item is vital as e-commerce and online marketing are the most lucrative ways to make a tidy profit.
Once you’re ready, it’s time to consider the legal structure of your company. Most home-based businesses tend to be spur-of-the-moment, one-person shows out to make a quick buck. However, this is not the best way to start an activity that could turn out to be the basis of a thriving business.
All businesses in Indonesia are required to be registered with the Trade Register or Company Registry in Indonesia and can take the following forms:
Legal Entities Requiring Government Approvals:
- Local Limited Liability Company (Perseroan Terbatas or PT)
- Limited Liability Company (Perseroan Terbatas Penanaman Modal Asing or PT PMA)
Business Entities Requiring Only Registration:
- Civil Partnerships
- Limited Partnerships (Comanditer Venootshcap or CVs)
Registration is done via the Online Single Submission (OSS) system, an online platform that facilitates the licensing of these entities. The OSS system will issue a Business Identification Number (NIB) and a license to conduct your business legally. You will also need to get tax registration done and acquire a tax registration number.
Approvals for home-based businesses are still being codified as home-based businesses are a broad category, and not all will require permits. Depending on the activity, these are some of the approvals that you might need:
- Food Safety Permits – from the National Agency of Drug and Food Control or Badan Pengawas Obat dan Makanan (POM)
- Halal Certification – as of 2019, all food products must have a Halal Certificate while those without must display a Non-Halal notice.
- E-Commerce Trade Business License (Surat Izin Usaha Perdagangan melalui Sistem Elektronik or SIUPMSE) – from the Ministry of Trade Regulations (MOT)