How to Start and Incorporate a Company in Indonesia?

The growth in the number of new companies (startups) in Indonesia can act as an indicator of the current economic development. According to the data compiled by Startup Ranking records, there are more than 2,000 startups that have emerged in Indonesia in 2022. This is also supported by the government's focus in fixing the bureaucratic flow of business entity establishment.

The Government's accelerated business service program has driven new enthusiasm to business players to improve their business’ quality. Establishing business legality today is supported by a licensing ecosystem that can be accessed online, which facilitate entrepreneurs to run their business activities. Processing legalities for a company establishment now can be done in a short time.

To learn more about this subject, let’s dive into the following info about establishing business entities in Indonesia. 

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Company Category

1. Domestic Capital Companies

Domestic Capital Company (DCC/PMDN) is a business entity with investment activities carried out by Indonesian citizens as its shareholders. The most in demand DCCs at the moment are the Limited Liability Company (LLC/PT) and CV.

Limited Liability Company according to UU PT No. 40 of 2007 is a legal entity with shared capital, established based on an agreement, conducting business activities with an authorized capital which is entirely divided into shares and fulfills the requirements stipulated in the Law and its implementation regulations. 

Meanwhile, the definition of Comanditer Vetnooschap or CV in general is a form of partnership or cooperation business entity established by two alliances in the form of active partners and passive partners to run their business.

2. Foreign Capital Companies

According to Perka BKPM No. 15 of 2015 about Guidelines and Procedures for Licensing and Non-Licensing of Investment, Foreign Investment is an investment activity to conduct business in the territory of the Republic of Indonesia which is carried out by Foreign Investors, either using fully foreign capital or joint venture with Domestic Investors.

In accordance with the Law of the Republic of Indonesia No. 25 of 2007 about Investment, Foreign Capital Company (FCC) must be established in the form of a Limited Liability Company or PT which is carried out by buying shares, taking shares at the time of establishment of the company, or through other methods in accordance with the provisions of laws and regulations

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Company Establishment Requirements

Before diving deeper into the requirements for company establishment, there are several things that need to be prepared ahead for both DCC and FCC as follows:

1. Company name;
2. Official capital agreement;
3. Details of issued and paid up capital;
4. Business location that has to be in industrial or commercial area;
5. The structure of the commissaries and management of the company;
6. Line of business sectors; and
7. Personal data from the founders and commissaries (ID card, email address and phone number).

After the required data is submitted, you can start setting up a company in the form of DCC or FCC. The following are the requirements for establishing a PT and CV in Indonesia:

1. ID card of the founders and management of the company;
2. Taxpayer Identification Number of the company founders and management;
3. The director's Family Member Certificate;
4. Email address of the founder and management of the company;
5. Phone number of the company founders and management;
6. Proof of ownership of the business location in the form of:

• Copy of land certificate, building permit, and copy of proof of land and building tax payment of the last year if you own the location;
• Lease agreement or building domicile certificate if the office place you rent the space;

7. Neighborhood approval letter (front, back, left and right) known by RT/RW;
8. Photos of buildings, rooms, and office logos; and
9. Company stamp.

Furthermore, the requirements for an FCC are as follows:

1. ID card of the directors and commissaries (for citizens in the form of ID card, Family Member Certificate and Taxpayer Identification Number. For foreigners in the form of KITAS/Kitap/passport);
2. Email address of the founder and management of the company;
3. Phone number of company founders and management; 
4. Proof of ownership of the business place in the form of:

• Copy of land certificate, building permit, and copy of proof of land and building tax payment of the last year if the location is owned by yourself;
• Lease agreement or building domicile certificate if the office place is a rent;

5. Neighborhood approval letter (front, back, left and right) known by RT/RW;
6. Photos of buildings, rooms, and office logos; and
7. Company stamp.

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Capital Classification

When talking about establishing a company, we will also talk about its business capital. There is a classification that regulates the authorized capital, issued capital, and paid-up capital for companies. 

In Law Number 11 of 2020 about Job Creation, it is stated that a company is required to its authorized capital, and the amount of the company's authorized capital is determined based on the decision of the founder of the company.

Meanwhile, according to Company Law No. 40 of 2007, authorized capital is capital consisting of the entire nominal value of shares. The issued capital, which is at least 25% of the authorized capital, must be placed and fully paid with valid proof of deposit.

The Regulation of the Investment Coordinating Board Number 4 of 2021 about Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities explains that the minimum capital requirement for FCC is more than IDR 10,000,000,000 (ten billion rupiah). This sum does not include land and buildings according to the latest financial statements.

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The Legality of The Company

In general, the required permit or legality documents that must be obtained at the time of establishment of a PT or CV are as below:

1. Deed of establishment by a notary;
2. A Decree by the Ministry of Law and Human Rights through a notary;
3. Taxpayer Identification Number and Registration Certificate of the Company obtained from the Tax Institution;
4. Business Identification Number issued by OSS RBA; and
5. Business license issued by OSS RBA.

Meanwhile for FCC, it includes these following legal requirements:

1. Deed of establishment of the FCC by a notary;
2. A Decree by the Ministry of Law and Human Rights through a notary;
3. Taxpayer Identification Number and Registration Certificate of the Company obtained from the Tax Institution;
4. Business Identification Number issued by OSS RBA; and
5. Business license issued by OSS RBA.

So, have you got the gist of how to start a company and the registration process in Indonesia? When starting a company, a lot of factors need to be considered and carefully planned. One of the most crucial aspects is business finance.

Companies are built to generate profits. For this reason, careful financial planning and monitoring is a must. Fortunately, there are a lot of modern financial softwares that you can use to make your business operations easier. Helping companies to save time and costs.

One that is built to help companies scale, and will help you manage your business finance easier since your company’s establishment is Aspire. Aspire is an all-in-one finance software with features, such as approval system, budget management, payables and receivables management, and multi-currency business accounts that can help your business implement financial operational best practices with no sweat.

To find out more about Aspire, check here or talk to our team to schedule a demo and find out more about Aspire's features that will make your business finance operations easier.

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