Understand the Jurisdictions Setup Requirement Before Proceed Your Company Incorporate in Indonesia
Investors these days have been flocking into Indonesia, and there are valid reasons for that. The country has the largest economy in Southeast Asia. One of the emerging markets in the world, the growth in the GDP rates are so exciting that it almost seems like a talisman for those willing to invest in the place. Well, there are many other reasons to start a business in Indonesia including the stable government, incentives, and decreasing corruption rate, but the process of starting a business in Indonesia might not be a piece of cake. So thus, we try to make it easy for you with this guide to start a business in Indonesia.
The Basics of Starting a Business in Indonesia
First, Study the Market
This is what you do first to start a business in Indonesia. You need to study and analyze the Indonesian market to understand how it works. Check the things that people are buying and stuff they are not interested in. Also, check to see if the people are having any problems and need a solution.
You will also need to research your potential competitors and try to know more about how they do things. This way, you will be more effective in moving on to the next step.
Next, Work on Your Budget
Of course, you don’t have unlimited funds- nobody has. Business is all about using the money to make more money, but first, you will need to understand how much you can afford and what your limit is.
If you think that you don’t own enough money to start your business, you have other options. You could take a loan or get help from crowdfunding or angel investors. Remember that getting sponsors is all about having a viable business plan and marketable service, which we discuss below.
Finalize Your Product/Service
Now you know the interests and problems of people, so you will be able to prepare something to sell. Understand this- people don’t buy what you want them to buy, but they get things that they need. So, you will need to be very careful about what product or service that you offer.
Marketing is one whole game. Many businesses with beautiful products fail in the Indonesian market because of lack of marketing ideas. You will need to give some busy time to your brain to learn marketing, as it is the only way you can make your customers aware that you exist.
And while preparing your marketing plan, make sure that you include the internet. Internet Marketing is taking off in the Indonesian market, and you will be able to make a noise in the country with your business if you have a good understanding of how the world wide web works.
After the Basics, You Need to Register Your Company
The next step to start a business in Indonesia is registering the business itself. Here is the step by step guide to starting a business in Indonesia.
Choose the Type of Company
Depending on the nature of business you can open the following types of companies in Indonesia:
Also known as a sole proprietorship, a single individual owns this company. The owner is liable for all the losses and debts, and at the same time, has the rights to the entire profit that the company makes. It is the purest form of company in Indonesia but is also the one which carries the most risk as the owner’s asset is not protected from that of the company. A sole proprietorship is suitable only for those who want to start a small business in Indonesia.
In a partnership, multiple individuals come together and invest together in a company. The assets of the partners, in this case, as well are not protected from the company, and it still carries risks. There are two types of partnership companies in Indonesia:
General Partnership: Every individual makes equal investments so, everyone gets equal profit. Also, every partner has decision-making rights.
Limited Partnership: Limited Partnership is an extended form of a general partnership. Some limited partners don’t make as much investment as the general partners, so their profit, as well as decision-making rights, are limited.
Limited Liability Company in Indonesia (Perseroan Terbatas)
The limited liability company is the most popular type of business vehicle in Indonesia. There are two types of limited liability companies in Indonesia, the Indonesia Limited Liability Company and Foreign-owned Limited- Liability Company.
Indonesian Limited Liability Company
At least two Indonesian nationals should invest in an Indonesian Limited Liability Company. The minimum share capital requirement is 50 Million. This could be higher in some certain sectors. The company needs to appoint a manager and a commissioner, out of which the commissioner can be of another nationality.
Foreign-Owned Limited Liability Company in Indonesia Perseroan Terbatas Penanaman Modal Asing(PT PMA)
Another one is the foreign-owned limited liability company in Indonesia. The requirements are higher than the previous type of limited liability company, and of course, the investors can expect some limitations on the sectors they can dwell in. A PT PMA needs at least two shareholders, President Director, and President Commissioner, out of which at least one should be a foreigner. Also, the director of the company should reside in Indonesia during the course of business.
The minimum capital required to open a foreign company in Indonesia is 10 Billion Rupiah, out of which 2.5 billion is the paid-up capital. Remember that depending on the business, the capital investment requirement might be higher.
A representative office is for learning the Indonesian market for investors before they start a business in Indonesia. A representative office is just established for administrative purposes, and it can’t make any profit. It is for foreign companies which first want to analyze and research in the market of Indonesia before they start as full-fledged business firms. These are the types of representative companies in Indonesia:
- General Representative Office of a Foreign Company (KPPA)
- Representative Office of a Foreign Construction Service Company (BUJKA)
- Representative Office of a Foreign Bank and Finance
- Representative Office of a Foreign Trading Company (KP3A)
- Representative Office of a Foreign Oil and Gas Company (KPPA MIGAS)
You will need to gain special licenses to open a representative office in Indonesia. The validity and the cost of permits depending on the type of representative office.
The Key to Success in the Indonesian Business Market: No Matter What Business you Commence in Indonesia, Have a Local Partner
Even if it is on Foreign Limited Liability Company, you will need to hire local talent. This is because the government of Indonesia strictly believes that foreign investment is good, but it should not squash local skills. So, before you start a business in Indonesia, you will need to partner with a local investor who has the same conviction as you can stand their own ground.
Start the Official Company Formation in Indonesia
Now that you know the market and the type of business, the next thing you need to do is register your company. You can do it yourself if you are a local (it might take some time and effort). However, you must seek out professional help if you are a foreign investor. Well, that won’t be a problem for you because our team at 3E Accounting Indonesia can help you get through the entire Indonesia company formation process in no time.
The process of registering a company in Indonesia is different for different types of business entities. However, down we provide the general information which will be helpful for every type of company in Indonesia.
Determine an Address for Your Business
You will need a registered address for every type of company in Indonesia. So, the first thing you need to do is find a physical address for your business. The registered address cannot be a P.O. Box Number. This address will be registered as the location of your business in listings, and all the mails that you get will also be sent to your registered address.
Choose the Company Name
The next step to company formation in Indonesia is choosing the appropriate company name. The name should not be vulgar and should not be too similar to other companies in the market. At the same time, the name can’t promote bad behaviour and also should represent the business activity. You should submit your company name with the Ministry of Law and Human Rights of Indonesia.
After Choosing the Name of Company, Make an Application to Gain the Necessary Permits
What we are giving you is a guide to start a business in Indonesia, we can’t neglect the fact that you will need to apply for the necessary permits quick. The permits that you need depend on the nature of the business you do.
You will need to gain the main license from Indonesia Investment Coordinating Board. The process on average takes 12 days, so it is better to start off as fast as you can.
Register with the Workers Social Security Program
Indonesia is very protective of its citizens. Thus, every business should register with the worker’s social security program.
As a business, you are an employer. Thus, depending on the size of the company, you will need to pay accident funds, insurance and other money for the security of your employees. This means you will need to fill the social security certificate for everyone you hire, and it might take a long time so you should consider assistance from a corporate service provider.
Prepare the Articles of Association
The next step to start a business in Indonesia is the preparation of articles of association by a notary. You will need to include the following information in your Articles of Association.
- Purpose and Goals of the Company
- Type of the Company
- Address and other relevant information about the company
- Information about the directors, shareholders, and members
- Information about the paid-up capital
- Shareholder Meetings
- Information about the schedule of Annual General Meetings (AGM)
Get a Certification of Domicile
You will also need to get the certification of domicile. This is for the non-resident taxpayers. There are two types of certification of domicile in Indonesia:
- Certification of Domicile for Non-Banking Institutions (form DGT-1)
- Certification of Domicile for Banking Institutions (form DGT-2)
You will need to fill a form to obtain the domicile where you will need to furnish information about the dividends, interest, royalties and also residency and ownership tests.
Register for the Tax
Registering for tax in Indonesia means getting the Taxpayer registration number and also the VAT number. For this, you will need to provide a summary of your business and finance and then register with the Tax Office in Indonesia.
Open a Corporate Bank Account
You will be glad to know that from local finances to multinational bank -franchises, you have plenty of options for your corporate bank account. Choose wisely, look for the bank which exactly fits the need of you and your company. One thing to make sure is that some banks require you to physically present to open an account. But whichever bank you open an account, you will need to provide them with your proof of residence and business details for verification.
Apply for the Deed of Establishment
Every Limited Liability Company in Indonesia should obtain a Deed of Establishment from the Department of Law and Human Rights. This is a fairly long process, and on average, it takes about 18 to 22 days for the Department to verify the company. The Deed of Establishment is written in Bahasa Indonesia (the national language), and contains the following information:
- Information about the founders of the company.
- Information about the Board of Directors and its members.
- Particulars of every member of the Board of Commissioners.
- Data about the shareholders.
Get the Company Registration Certificate
After receiving the Deed of Establishment, companies can get the certificate of registration. This again takes about 20 days and is provided by the local government of the place you wish to establish your business. And thus, with the company registration process, you will also obtain a business registration number.
The next step for you to start business Indonesia is to hire employees for the company. There are no limitations to the number of employees you hire depending on your business needs, but you should pay at least the minimum wage to everyone. However, there are some conditions for foreign employees.
If you are to hire a foreign employee for your business, you will need to make sure that they are skilled in the relevant field. They need to be certified in the area of business or require minimum experience of at least five years. Also, for every foreigner you hire, you will need to employ at least 10 Indonesian locals. Anyway, in some cases like urgent or temporary work, this 10 to 1 ratio doesn’t apply.
FAQ: Do I need to register foreign employees in the Taxpayer and the National Social Security System?
Yes, you need to register your foreign employees in the Taxpayer and National Security System if they are working for you for more than six months.
How Much Time Does it Take to Register Business in Indonesia?
Compared to other countries in the world, registering a business in Indonesia is a relatively lengthy process. It might take you several months to complete the process to start a business in Indonesia.
Can Foreigners Start Business in Indonesia Themselves?
Let us be frank here; it is literally impossible for foreigners to start a business in Indonesia themselves. The registration process is too complex for foreigners even to try to attempt it so that they will need help from a local representative.
Anyway, that will not be a problem given that 3E Accounting is now operational in Indonesia. You can contact 3E Accounting Indonesia so that we will take you through the entire registration process to start a business in Indonesia. All you need to do is state us your requirements, and we will register your company for you in the minimum time and cost.
How to Start a Home-Based Business in Indonesia
Owing to the fact that many people want to start a business in Indonesia from home these days, we want to include some information about starting a home business in Indonesia. So, here is a small guide to start a business in Indonesia from home.
What is considered as Home-Based Business in Indonesia:
A very small business usually run by a single individual is considered as a home-based business in Indonesia. Here are some examples of Home Businesses in Indonesia:
Street Food Stall
Selling food such as Bakso, Fritter, and Tofu isn’t only about spreading smiles but also is an excellent investment for those who want to make money by themselves.
A Home-Based Bakery
A small bakery in your house could also be an excellent home-based business idea in Indonesia. Of course, you need skills, but you can make a satisfactory income.
Believe it or not, but street vendors make quite a good income in Indonesia. All they need is something cheap to sell and cart to pull, and the returns often feed a family.
If you have specific computer skills, freelancing could be a great option for you. There are many skills which convert to money in Indonesia; some of them being copywriting, programming, etc.
Many corporations need translation services from English to Bahasa Indonesia and vice-versa. Those who work as translation service providers make a fortune.
Remember that salons and beauty parlours can be a big business or small. Anyway, opening one on a small space on your home could be profitable, as the primary income or side hustle.
A small tailoring shop is another way you could dwell as your own boss. You might need to learn the skill, but if you do manage to grasp it splendidly, it will be worth it.
Well, there are many other examples of home business in Indonesia. You will need to see what suits you and devise a business plan; it is not hard to make sufficient income with what you do.
Do I Need to Register a Home-Based Business in Indonesia?
Well, it all depends on the nature of your business. If your business is somehow more significant than what’s considered home-based on general terms, you might need to register as a sole proprietor. For this, we recommend you to contact local authorities if you confused about whether you need to register a business in Indonesia.
What are the Limitations of Opening a Home-Based Business in Indonesia?
Well, first, of course, you cannot do anything illegal. Then, you will need to make sure that home business is a micro-business, so you can’t load/unload things from a truck or hire employees. Also, you need to ensure that your company doesn’t disturb your neighbours or anyone in the neighbourhood where you have your stall.
The requirements of a home business Indonesia are quite simple and easily understood. All you need to do is have a plan, and you can move forward; the government supports you.
Well, this was our guide to start a business in Indonesia. If you are looking for an easier way to register your business in Indonesia, you can contact 3E Accounting Philippines. All you need to do is state us your requirements, and then we will register your Indonesia company for you in no time.