Indonesia Business Setup: Are Shareholders Required?

Does Every Business Setup in Indonesia Require Shareholders?

  • InCorp Editorial Team
  • 29 August 2024
  • 7 minutes reading time

Not only should every entrepreneur have the grit and energy to start a new venture through a business setup in Indonesia, but they should also meticulously consider several factors and be constantly informed to pursue a business idea.

With the correct information, only you can spin your brilliant idea into an enterprise that will eventually bring sustainable profit through Indonesia business opportunities. You will first have to consider the type of legal entity for your business and the shareholder requirement for each entity.

Can Foreigners Own Business in Indonesia?

Foreign investors can apply for an Investor KITAS suitable for those who wish to serve as company directors, shareholders, or commissioners. 

One of Investor KITAS’s main advantages is that it allows investors to begin working immediately without needing to pay the work permit waiver fee (DPKK), and the application process is simple.

Investors can apply for a 2-year KITAS, which permits multiple entries into and exits from Indonesia during its validity. An investment of at least IDR 1 billion in shares is required to qualify. Additionally, the company’s total capital investment must exceed IDR 10 billion.

What is the Most Profitable Business in Indonesia?

Before registering a company in Indonesia, consider these five profitable business sectors:

E-Commerce

Indonesia’s eCommerce market is booming, with a projected gross merchandise value (GMV) of USD 160 billion by 2030. Growing internet penetration, smartphone use, and social commerce, especially on platforms like TikTok, make this sector highly promising.

Travel and Tourism

As Indonesia’s economy grows, so does its travel and tourism sector. The industry is expected to generate over 5 million jobs by 2033, with Bali frequently topping global travel destination lists.

Infrastructure and Construction

Indonesia’s need for updated infrastructure presents lucrative opportunities. The government is focusing on public-private partnerships (PPPs) to attract investment and expertise for national development.

Mining

Indonesia is a key player in global mining, producing coal, gold, tin, copper, and nickel. The government is boosting the sector by banning raw material exports to increase job creation and profits.

Aviation

As an archipelago of over 17,000 islands, Indonesia relies heavily on air travel. The country is the second-fastest-growing aviation market, and new airports and upgrades are needed to support increasing air traffic.

These sectors offer significant investment potential in Indonesia’s growing economy.

How to Setup a Business in Indonesia 

Business Setup in Indonesia: Are Shareholders Required?

If you have decided on your business sector, the initial step in starting a business in Indonesia is to select your desired company structure. The available options are:

  • Foreign Limited Liability Company (PT PMA)
  • Local Limited Liability Company (PT)
  • Representative Offices

The PT PMA is the most favored choice for foreign investors, as it permits 100% foreign ownership and allows the employment of foreign workers. 

A company’s registration in Indonesia must be conducted online through the local OSS system, where you will receive your NIB and any necessary licenses. 

The following steps are required:

  1. Obtain approval for your company name.
  2. Acquire your Deed of Incorporation (including the Articles of Association) with a notary present.
  3. Secure approval for your legal entity from the Ministry of Law and Human Rights.
  4. Register for a Tax ID (NPWP), which is necessary to obtain business licenses, fulfill tax obligations, and conduct banking activities.
  5. Obtain a domicile letter that verifies your business location.
  6. Acquire your unique company profile number (NIB), business license, and any local permits required.
  7. Apply for any additional licenses as needed.
  8. Obtain work permits.
  9. Open a bank account.

Business Setup in Indonesia: Differences Between PT and PT PMA

Here are some essential distinctions between PT and PT PMA that you should be familiar with before deciding to incorporate your company in Indonesia.

CategoryLocal-owned Company (PT)Foreign-owned company (PT PMA)
OwnershipOnly an Indonesian citizen can own a PT. Foreigners can only start a PT through a Special Purpose Agreement.Only an Indonesian citizen can own a PT, and foreigners can only start one through a Special Purpose Agreement.
Local Ownership100%Maximum foreign ownership: 100%
Sector RestrictionsForeigners choose PT when specific sectors are not open for foreign investments.The percentage of foreign ownership allowance is based on business classification under the latest BKPM’s Positive Investment List.
Minimum Capital InvestmentBetween IDR 600 million and IDR 10 billion (depending on company size).1. Minimum investment plan: IDR 10 billion.
2. Minimum paid-up capital: IDR 10 billion.
Enterprise Classification (Job Creation Law)1. Micro-enterprise: less than IDR 1 billion
2. Small enterprise: IDR 1 – 5 billion
3. Medium enterprise: IDR 5-10 billion
4. Large enterprise: more than IDR 10 billion		–
Foreign Employee Sponsorship–Can sponsor foreign employees.
Reporting Requirements–Required to submit monthly investment activity reports and tax reports.

What is A Shareholder?

When you have decided to start a business, you might be familiar with the term “shareholder.” But what exactly is a shareholder?

A shareholder is an individual, organization, or institution that holds at least one share of a company’s stock or a mutual fund. Essentially, shareholders are considered company owners, granting them the right to participate in its profits.

Requirements When Shareholders Are Needed

How many shareholders are needed for company incorporation in Indonesia? It depends on the business structure you choose. A foreign-owned company, or a PT PMA, is one of the legal entities in Indonesia that requires shareholders.

So, if you plan to start a PT PMA in the country and start your Indonesia foreign investment, you will need at least two shareholders. Your PT PMA’s shareholders can be corporate entities, individuals (locals or foreigners), or a combination of both.

If foreign nationals fully own your PT PMA, the foreign owners must sell a minimum of 5% shares to an Indonesian citizen or legal entity in the country. Furthermore, a public company has the most rigorous requirement compared to the PT and PMA: it needs at least 300 shareholders.

READ MORE:

Requirement When Shareholders Are Not Needed

The shareholder requirement in terms of its number does not apply to every entity in Indonesia. You don’t need shareholders if you run a business with sole proprietorships or civil partnerships. Business owners set up a sole proprietorship to fully control the company and prevent others from owning the company’s shares. As a result, shareholders are optional for this type of structure.

Civil partnerships can be divided into limited blocks (CVs) and firms. Both do not need shareholders. Partners in a civil partnership have active or passive roles in the company, so shareholders are not required.

READ MORE:

Restrictions on Foreign-Owned Company Partnerships

Foreign-owned company partnerships in Indonesia are subject to specific limitations and regulations to protect national interests and encourage economic growth. Here are the key points you should know:

Business Sectors

Specific business sectors are reserved for Indonesian ownership. These are known as the “Positive Investment List” sectors, and foreign investors who open a business in Indonesia may face limitations or require special permits to participate in them.

Investment Coordination

Foreign investors must coordinate their investments with the Indonesia Investment Coordinating Board (BKPM) and obtain the necessary permits and licenses.

Minimum Ownership

The foreign ownership limit in most sectors is typically 67%, with the remaining 33% reserved for Indonesian ownership. However, this can vary depending on the industry and specific regulations.

Land Ownership

Foreign-owned companies may face restrictions on owning land. In some cases, they can only lease land, while Indonesian entities can own it.

Licensing and Permits

Foreign-owned companies must adhere to Indonesian regulations and acquire the necessary business licenses and permits to operate legally.

Guide to Doing Business in Jakarta

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How InCorp Can Assist with Business Setup in Indonesia

If you are considering company incorporation in Indonesia, you must take several necessary steps. It is prudent to partner with a professional provider with local expertise to ensure your business complies with every step of your venture.

InCorp offers tailored business solutions for your company incorporation in Indonesia, including legal and financial consultancy. Our highly qualified team provides expert support from global and local perspectives to ensure a smooth incorporation process.

Contact InCorp now, and we’ll help you construct the best strategy to capitalize on your market opportunities in Indonesia. Fill in the form below.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.