Things to Consider before Starting Business Setup in Indonesia

Things to Consider before Starting Business Setup in Indonesia

Predicted as one of the countries with the most powerful economy in the near future, Indonesia is such a pertinent place for the world’s business people to open a fresh market as well as growing their company. Although a handful of challenges like adjusting the local culture and confronting the political situation is likely inevitable, the island nation incredibly offers a vast range of opportunities for the betterment.

Foreigners might be subjected to an elaborate matter which is mostly time-consuming when it comes to initiating business setup in Indonesia. Aside from proper understanding allowing you to delve into the country’s customs and business surroundings, you are encouraged to take a few indispensable things into your deliberate consideration. And the same is true with the avoidance.

How do Business Entities in Indonesia Look Like?

Things to Consider before Starting Business Setup in Indonesia

As a matter of fact, there two major types of business entities in Indonesia – the limited liability company called PT and foreign-owned limited liability company or PMA. The PT standing for Perseroan Terbatas is commonly run by the locals. To establish this sort of enterprise; a director, a commissioner, and two shareholders native to Indonesia are indeed required.

According to healyconsultants.com, the paid-up share capital of PT varies from 37,435 USD to 748,740 USD, hinging on the company’s size. It is classified into three parts – a small size corporation, a medium size company, and a large entity. After incorporation is made, the share capital which has been issued has to be deposited to the company’s bank account immediately.

Meanwhile, the PMA standing for Penanaman Modal Asing refers to a company that is fully or partially controlled by foreign investors. And it is ruled by Indonesia’s foreign capital investment law. Once you go for the business setup in Indonesia, it is vital that you let everything in regard to application and formality registered. Although the whole process of company registration takes a lengthy time, it’s nothing yet rewarding.

Related12 Reasons why to do business in Indonesia

Things to Avoid before Setting up Company in the Country

Before fatalities occur, it’s so important to know things to keep away so that common mistakes often made by most foreigners can be anticipated.

1. No Tangible Business Activities

Grasping what type of business activities you are going to run is definitely significant—they are strongly associated with the business classification. In fact, not all of the enterprises in Indonesia are handled by foreigners, and even some restrict the strangers to get ownership. For instance, some lifestyle companies in Bali offer varied unclear activities under one company that baffle foreign entities. Instead of giving benefit, they let your work fall apart.

 

2. Setting up the business with too Small Capital

Another disadvantage you need to avoid is taking the smallest sum of paid-up capital required by the Indonesian company law. Due to protecting the locals, Indonesia only allows the foreign-owned company to commence the business with a minimum amount 190,000 USD. The key reason why you can’t do that is the higher risk dealing with bureaucracy if you raise the capital in the future.

In conclusion, starting business setup in Indonesia is not as easy as falling off a log. It definitely requires full consideration and deep understanding.

HOW CAN SMART LEGAL CONSULTING HELP YOU?

SMART Legal Consulting has extensive experience in helping investors set up a company in Indonesia. Our connections with the local government in Lombok will make the process of obtaining the permits and/or licenses for your business more effective and efficient.

If you need immediate assistance, please contact the SMART Help Desk at:

E:  info@smartcolaw.com

H: +62821-1234-1235

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