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Top 5 Mistakes You Need to Avoid When Setting Up a Company in Indonesia

Posted 2.10. 2017 by Cekindo / Last update on 7.08. 2018

Top 5 Mistakes You Need to Avoid When Setting Up a Company in Indonesia Review by Michal Wasserbauer on 2. 10. 2017 Company Registration in Indonesia, Market Research in Indonesia, Work Permit in Indonesia, Product Registration in Indonesia, Local Partner Selection in Indonesia, Trade Mission in Indonesia, Company Formation in Indonesia, Company Establishment in Indonesia, Company Set Up in Indonesia, Payroll Outsourcing in Indonesia, Tax Reporting in Indonesia, Medical Product Registration in Indonesia, Medical Device Registration in Indonesia, Cosmetic Registration in Indonesia, Food Supplement Registration in Indonesia.
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Running a business means treading wrong paths. In some cases, that’s fine – that’s how you learn and become a more effective leader. However, a lot of them are not only costly but also ruin your business and personal reputation. They can even land you in hot legal water.

When you’re setting up a company in Indonesia, make sure you step away from these five common and outrageously dangerous mistakes:

1. Bad Local Nominee

Although Indonesia is opening itself to more foreign investments, a number of its businesses remain prohibitive. It could be foreign direct investment companies cannot open an enterprise in a specific industry, or they could invest but only up to a certain percentage.

From here on, your business requires a local nominee, and this is where the problem begins. If you don’t perform due diligence, don’t go through more formal channels to find a trusted local nominee, or skip proper documentation of the agreement, you could be on the losing end. Your chosen nominee can take control of everything you own.

Indonesia’s top global business partner Cekindo is here to help you setting up a company in Indonesia. Afterward, we can also help you find and choose your local nominee. If you don’t want to be a foreign direct investment firm, we can also help you select a local partner for distribution.

2. No Business Office

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One of the main requirements in company registration is a domicile letter, and the law says you cannot set up an office in a residence. In other words, you need to have a legitimate corporate office.

Although the cost of office rent in Indonesia is lower than in some Asian countries such as Singapore and Hong Kong, it may still be impractical to certain businesses, such as startups or a small team.

Cekindo offers various office setups for your business from virtual office to shared office space. Our packages are reasonably priced and flexible to accommodate your present needs and budget. Regardless which one you choose, we will provide you with a domicile letter. Furthermore, one of our specialists will provide you with a FREE business consultation particularly on registering a company in Indonesia. To learn more, click here.

3. Failure to Hire a Local Worker

While Indonesia doesn’t restrict you from hiring foreign workers, it has set conditions. In an effort to provide more jobs for its local citizens, the country imposes foreign companies to hire one Indonesian for every foreign worker hired. You will also need to pay certain fees and make sure expatriates have the correct visa and work permit.

4. Very Small Lead Time

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Indonesia is doing very well when it comes to the ease of doing business, but that doesn’t mean red tape and bureaucracy are over. It can take as long as 10 weeks to process your company registration, and you need even more time for market analysis, selection of industry and business category, etc.

Cekindo has a wide variety of business services, and we can support you from setting up a company to fill in outsourcing of business functions. You can also look into buying a shelf company from us. Read this post to get a better understanding of how it works.

5. Very Small Capital

The minimum capital for foreign companies (PT PMA) is IDR 10 billion ($800,000). About 25 percent of it should be paid-up capital.  It’s separate from all the other expenses you will incur while setting up and running your business at least within the next 6 months to a year.

Indonesia has a fast-growing economy foreign investors can maximise. But first, you need to learn to follow the rules first and avoid committing errors that will force you to fold.                     

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