Running business in foreign country indeed requires complex matters. One among countries with long and complicated bureaucracy when it comes to setting up a business is Indonesia. Many foreigners find it is time-consuming to register their companies in this country. Regardless to company formation Indonesia that is overwhelming, this country is somehow potential. Located in strategic place, Indonesia offers prospective market for any company that wants to start business.
For anyone planning to set up a business in Indonesia, it is important to know any regulations applied by Indonesian government related to foreign company. You should note that even business with 1 percent of foreign shareholder is considered as foreign company. To get to know more about company formation in this country, here are important things you should know.
Types of Company Formation Indonesia
Before running a business in Indonesia, you need to understand the business climate in this country, one of which is finding out the company formation Indonesia as well as the types. Actually Indonesia has several types of company which is typically determined based on the shareholders. Below are several types of company that you can find in Indonesia:
- Indonesian Limited Liability Company (Perseroan Terbatas)
Indonesian LLC or commonly known as PT refers to business entity which is used by locals. This is the most common type of company formation Indonesia. LLC requires one director, two local shareholders, and one commissioner. The commissioner itself can be non-local individual, whose responsibility includes supervising the company and examining annual report.
The LLC itself is divided into three types in accordance to its size. The three types are small size company, medium size company, and large company. The last mentioned requires share capital more than US$748,740. Both medium and large size company is allowed to sponsor foreign employee while the small size one is not.
- Foreign Owned LLC (Penanaman Modal Asing)
This is the company type that you can have whenever starting up a business in Indonesia. Any foreign company is registered as PMA in Indonesia. Even an LLC which is partially controlled or owned by foreigners is also known as PMA. Any PMA registration is a subject to prior approval by the authorities and you are also required to pay minimum capital of US$300,000. Company formation Indonesia as PMA requires you to proceed at least 3 processes which include approval, application for identification number to operate, and application for operational license.
When it comes to Indonesia company formation as PMA, it must be setup with at least one resident director, two shareholders, and one commissioner. If the company is fully owned by foreigner, the owner is required to sell at least 5% or share to Indonesian citizen within 15 years. Or else, your company should set up a joint venture with local company with at least local owning of 5%.
- Representative Office
Some foreign companies decide to use this type of company to set up a business in Indonesia. It is considered as the most convenient way to gain market presence. Unfortunately, this entity is permitted only to conduct promotional activities, country buying or selling agent, and market research. This representative office commonly acquire operating license only for 2 years or depending on the parent company.
How to Set Up Company Formation Indonesia
When deciding to form a company in Indonesia, you need to understand the regulation and follow the entire process. Recently, the Indonesian government released a new regulation about company formation Indonesia which makes the incorporation process more open. The goal is to attract as many investors to come and invest their money in Indonesia. So, how to establish a PMA? It typically consists of 3 main steps as follows:
- Approval of establishment
The very first step to do is processing the approval on establishment of legal entity. Once you contact Indonesian business consultant, they will help you making a check on business activities of your company. Once everything is clear, you need to wait for the Deed of Establishment issuance. The deed of establishment then should be ratified by Ministry of Law and Human Rights.
- Application of Identification number
When the establishment of company formation Indonesia is approved, the next step is applying for identification number of operation. The business consultant will help you to register to OSS. When everything is clear, the NIB will be issued along with your company profile.
- Application of operational licensee
The last but not least step is submitting application for operational license. This can only be processed right after you obtain NIB. The license will only be issued according to your business activities.
In short, company formation Indonesia is rather complex that potentially drives you overwhelmed. Get some help from Indonesian business consultant to proceed the business setup. The most important, you need to follow the regulation and complete the required documents for smooth formation process.
