Business entities in Indonesia, also known as separate entities, do not allow mixing up transactions related to the business with those of its owners or other businesses.
Transactions associated with the business must be recorded separately, and the performance in terms of profitability and cash flow must be measured independently as well. Doing so requires separate accounting records which exclude the assets and liabilities of individuals or other companies.
The main benefit of running business entities in Indonesia lies in the simplicity of their establishment. An Establishment Deed signed in front of a notary and legalized by the Local District Court is sufficient, and no other legal processes are required.
In this article, we present the most common business entities in Indonesia known as Limited Partnership, Firma, and Perusahaan Perorangan (Sole Proprietorship).
What is the most prospective business sector in Indonesia? Read here 5 Most Prospective Business Sectors in Indonesia
Commanditaire Vennootschap, also known by its acronym CV, is a partnership established by one or several Indonesian citizens, which includes both active and sleeping partners.
Sleeping partners, also known as silent, limited, or passive partners, only invest in the operation of the company and do not interfere in the management and business activities.
Their profit is limited depending on the capital they provide as well as their losses. Overall, they have less exposure to liability.
Known as general partners, these individuals act as leaders and take full responsibility for a company’s liabilities and assets.
They run the company, have control over the management, operations, use of capital within the company as well as they have the right to agree and participate in business activities with third parties.
Firma, literally known as “trade union”, is often called Firma or Fa. This type of cooperative business entity form is established by two or more Indonesian citizens with a common name and is usually used in the commercial field such as trading and service business fields.
The founding of a Firma is proceeded by the execution of an agreement deed witnessed by a notary, and the responsibilities are evenly distributed and not limited to each partner.
Each partner has the right to lead and have the authority to represent the company, make decisions, and taking risks of losing his or her deposit.
Known as a sole trader, individual entrepreneurship, or proprietorship, this type of individual company is also called Perusahaan Perorangan in Indonesian.
It is a company owned by one person and thus the simplest business form to be run by entrepreneurs.
Individuals can create this type of entity without specific procedures as there are no special or statutory provisions governing these individual companies and legal distinctions between the owner and the business entity.
You might also want to check: FAQ: How to Start a Business in Indonesia
Choosing the right form of business entity in Indonesia is not a decision to be taken lightly. It is important for business owners to make such decisions with sound counsel and expert advice from business professionals.
Cekindo can help you in every stage of setting up your company in Indonesia. Contact our teams in Jakarta, Semarang, or Bali.