How to Establish an Indonesian Association in the Form of a Legal Entity

In Indonesia, an Indonesian association is an organization where individuals, companies, professionals, and groups come together to realize common goals and objectives for non-profit matters. Members of the association partner to realize social, religious, and humanitarian goals that will make a difference to the world.

Indonesian Association: Establishment Purposes

Indonesian association law, as stated in Article 1, Number 1 of the Regulation of the Minister of Law and Human Rights No. 3 of 2016, defines an association as a legal entity that members establish to achieve shared objectives.

Individuals or organizations set up associations in Indonesia with the below purposes:

1. Spread Information

To spread and disseminate information within the association quickly and efficiently through different media and platforms. For example, the association of environmental clean-up can circulate their news and updates about beach clean-ups rapidly to increase participation.

2. Networking

To network with members and professionals in the association. Through networking, members and organisations can build and foster better relationships, motivating them to achieve the association’s goals.

3. To Have a Support System

To have a valuable support system. Members of an association can provide mutual support due to their same interest in a particular field or goal.

4. To help others outside the association.

Types of Indonesian Association

There are two types of Indonesian association: non-legal entity association and legal entity association. However, the most common type of association in Indonesia is built in the form of a legal entity.

Non-legal Entity

These associations are informal groups formed based on shared interests, such as hobbies, social activities, or community service. They do not have legal status, meaning they cannot make binding agreements or own assets. Examples include community clubs and social groups.

Legal Entity

These associations are officially registered and recognized by law, allowing them to enter contracts, own property, and operate formally. They include foundations and associations that focus on social, professional, or business activities. Registration with the government ensures accountability and legal protection.

When an association is established as a legal entity, a group of individuals works together to achieve certain objectives and goals in the religious, social, and humanitarian areas. Members of the association do not have any legal rights to share the profits of the association.

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What Types of Indonesia’s Legal Entity in Form

In Indonesia, legal entities can take several forms, each with different structures and legal responsibilities. The common types include:

• Sole Proprietorship (Usaha Perorangan): A business owned and operated by one individual. It is the simplest form, but the owner is personally responsible for all liabilities.
• Partnership (Persekutuan Perdata or Persekutuan Firma): A business formed by two or more people who share profits, risks, and responsibilities. Partnerships can be general (Firma) or limited (Commanditaire Vennootschap/CV), where some partners have limited liability.
• Limited Liability Company (Perseroan Terbatas/PT): A business entity with legal status, where shareholders’ liabilities are limited to their investment. It can be privately or publicly owned and is the most common form for businesses in Indonesia.
• Corporation (Perseroan Terbuka/PT Tbk): A publicly traded company listed on the stock exchange. It has a separate legal identity from its shareholders and can raise capital by selling shares to the public.

Each legal entity type provides different levels of liability protection, ownership structure, and regulatory requirements, allowing businesses to choose the best fit for their operations.

How to Incorporate an Association in Indonesia

Indonesian association law governs the formation, organizational structure, and management of associations as legal entities under Law No. 16 of 2001 on Foundations, which was later amended by Law No. 28 of 2004.

To establish a legal association in Indonesia, you should get permission from the Indonesian Minister of Law and Human Rights.

The process of incorporating an association in Indonesia is as follows:

1. Request a Name for Your Association

Apply and submit the name of your association to the Ministry of Law and Human Rights by using the AHU Online system. Your application shall contain all the important information. It takes about 60 days for the Minister to approve your application.

2. Legal Entity Registration for Association

A notary, who is authorized to process legal entity registrations, must submit the application for association legalization through the AHU Online system. A mandatory application fee of IDR 250,000 must be paid to complete the process.

3. Obtain a Ministerial Decree Regarding the Association Legalisation as a Legal Entity

The applicant shall submit the establishment format with required supporting documents electronically. These documents consist of the following:

• A copy of the deed of establishment or a copy of the deed of amendment
• A statement of residency location with the association’s full address
• Funding source
• Work program of the association
• Meeting minutes
• Declaration letter not in a court case or a management dispute
• Statement concerning the founder’s ability to acquire a tax ID card

4. Upload the association’s deed of establishment

5. Receive the Ministerial Decree

Once the Minister has approved the application, the applicant shall receive a Ministerial Decree electronically in 14 days. The applicant also must print out and sign the Ministerial Decree and the Notary Public shall affix the hard copy with a stamp.

How InCorp Indonesia can Assist

InCorp can assist in establishing an efficient Indonesian association for businesses, expatriates, entrepreneurs, and individuals. Our experienced expert team will set up and customise the association structure that meets your specific business objectives.

However, it is important to have a full understanding of the most current regulations and legal requirements in Indonesia before going ahead to set up your Indonesian association.

Your decision can hamper the growth of your association if you make the wrong move. Consider seeking InCorp’s advice before taking the first step. Fill in the form below.