Understanding the types of businesses in Indonesia can be confusing, as there are many of them. In some cases, even the same type of entity has different categories, depending on the ownership, and the nature of shares. For example, large local companies in Indonesia are similar to a foreign company in Indonesia in terms of the capital. Especially for those who want to start a company in Indonesia, finding the right type of business is required, and if you also want to do so, here are types of business in Indonesia:

Local Company (PT PMDN)

A local company in Indonesia is similar to limited liability companies (LLCs) in terms of structure and function. It is the most common form of business entity in the country.

To open a local company, you need at least:

  • Two local shareholders. There is no limit on the maximum number of members.
  • One local commissioner.
  • One local or a foreign director.

For a local company, the investment needs to be entirely domestic. For a foreigner to be a director, they need an Indonesian tax ID number (NPWP).

Categories of Local Companies in Indonesia:

Local companies in Indonesia can fall under three categories.

Small companies: Local companies that are valued at IDR 50 million (USD 3.500) to IDR 500 million or (USD 35.000).

Medium-sized companies: Local companies that are valued at IDR 500 million (USD 35.000) to IDR 10 billion or (USD 700.000).

Large companies: Large companies are the companies that are valued at more than IDR 10 billion, which is around USD 700.000.

As the locals open local companies, they can invest in almost every possible sector. They don’t even need a registered address, and can freely use virtual addresses.

Foreign Company (PT PMA)

Foreigners generally need to open a foreign investment company, or PT PMA to do business in Indonesia. The structure and function are similar to the local companies, but foreign companies come with more restrictions and stringent rules about where they can invest.

Generally, a foreign company consists of:

  • Two local or foreign shareholders. Shareholders can be companies or individuals.
  • One local or foreign director.
  • One local or foreign commissioner.

A foreign company in Indonesia needs a registered physical office address. It can’t be a virtual address or a PO Box Number.

Remember, the percentage of shareholding doesn’t matter- as long as there is a shareholder in a local company who is not from Indonesia, the company is now a foreign company.

A foreign company needs to have a minimum investment plan of at least around USD 700.000. Furthermore, the paid-up capital is USD 175,000. Depending on the nature of the business, a foreign company can or can’t invest in some fields.

Representative Offices (KPPA)

Representative offices are more for establishing presence than conductive businesses. They are not allowed to generate revenue. Representative offices help owners or companies research a market before entering into it officially. Thus, they don’t have limitations on ownership, minimum capital, or the sector.

Apart from the evaluation of the market, representative offices also help foreign business owners communicate with Indonesian stakeholders.

Registering a Company in Indonesia?

Especially if you are a foreigner, the registration process can be complicated and consuming. Furthermore, you may need an advisor. Thus, you have to take assistance from a professional company registration service provider. To know more about it go to a reputable company formation Indonesia provider.