Limited Liability Company: A Complete Guide to Indonesian Market

Indonesia’s dynamic environment for businesses is reflected in the growing wealth, increasing middle-income group, larger young population, greater mobility, and urbanization, as well as the shifting consumer attitudes.

Entrepreneurs usually prefer to take advantage of the new business environment to achieve new business breakthroughs and horizons. Starting a business in Indonesia is definitely one of the ways how to make it.

Whether you are a small business owner or a big company, deciding to start a limited liability company in Indonesia is a big step. That’s why here in this article you will find helpful tips and information about how to start a limited liability company in Indonesia.

What is a Limited Liability Company in Indonesia

Limited Liability Company is also known as LLC or Perseroan Terbatas (PT) in Indonesia. In most cases, forming a limited liability company is the simplest way to start your business in Indonesia, and at the same time serve to protect your personal assets. In other words, the shareholder’s liability in this type of company is only limited to their shares, but not their personal assets. It is advisable to consult an operating agreement template to ensure all legalities are appropriately addressed from the outset.

There are two main types of PT in Indonesia:

• Local PT: Fully owned by Indonesian citizens or entities.
• Foreign-owned PT (PT PMA): Partially or fully owned by foreign individuals or corporations, and registered through the Indonesia Investment Coordinating Board (BKPM).

Reasons to Start a Limited Liability Company in Indonesia

1. Growing Middle Class and Consumer Demand

Indonesia’s rising middle-income population means more people are spending on things like food, housing, education, and lifestyle. This creates a large and fast-growing market for businesses, especially in consumer goods, services, and digital products.

2. Big and Young Market

With over 275 million people—many of them young and tech-savvy—Indonesia offers strong potential for market growth. Cities beyond Jakarta, such as Surabaya and Medan, are also growing quickly, giving new businesses a chance to expand early and gain loyal customers.

3. Easier Business Setup

The Indonesian government has simplified the rules for starting a business. Thanks to recent reforms like the Omnibus Law, setting up a PT is now faster and less complicated, with easier licensing, clearer tax rules, and more support for investors.

4. Attractive Government Incentives

Businesses in Indonesia can enjoy various benefits like tax breaks, import duty exemptions, and support for export activities. Foreign investors can also enter many open sectors listed in the Positive Investment List, making it easier to operate legally and profitably.

5. Great for Entering and Expanding in the Market

A PT offers flexibility. You can start small and scale up as your business grows. For foreign investors, it’s also possible to begin with an Employer of Record (EoR) setup before forming a full legal entity, allowing you to test the market with less risk.

Benefits of Starting an LLC in Indonesia

1. It helps to protect members against lawsuits. For example, if a company faces financial challenges, the personal assets of its members will not be taken by banks, government, and creditors.
2. It boosts credibility and makes it easier to work with banks, clients, and future investors.
3. A limited liability company will continue to exist even in the event of the death of a shareholder/shareholders.
4. It has a high opportunity and potential for expansion because it is easier for this form of entity to raise capital via angel investors, venture capitalists or other financial institutions.
5. It enables businesses to receive tax allowances, import duty exemptions, and other benefits from the Indonesian government.
6. A PT can legally hire local and foreign employees, register for BPJS (social security), and handle payroll and taxes.

Business Structure of an LLC

Before you think of incorporation of a limited liability company, you must make sure you have a clear idea of its legal structure.

Indonesia recognizes different types of LLC or Perseroan Terbatas (PT) based on ownership and capital size. Understanding these types helps you choose the most suitable structure for your business needs:

PT PMDN (Domestic Investment Company)

PT PMDN is a limited liability company fully owned by Indonesian citizens or legal entities. It is suitable for local entrepreneurs or Indonesian-owned businesses. This structure is commonly used by startups, SMEs, or companies that don’t involve any foreign investment.

PT PMA (Foreign Investment Company)

PT PMA allows foreign individuals or companies to legally own and operate a business in Indonesia. It is mandatory for any company with foreign shareholders, regardless of the percentage of ownership. PT PMA must be registered through the Indonesia Investment Coordinating Board (BKPM) and is allowed to operate in sectors listed under the Positive Investment List. This structure is ideal for foreign investors seeking long-term market access in Indonesia.

PT Perorangan (Sole-Owned Company)

Introduced under the Omnibus Law, PT Perorangan allows one person to establish and fully own a PT without requiring additional shareholders or commissioners. This type is only available to micro and small enterprises and cannot be used by foreign nationals or companies. It offers a low-cost and easier pathway to formalize small businesses in Indonesia.

Small, Medium, and Large-Scale LLC

PTs in Indonesia are also categorized based on the size of their paid-up capital, including:

• Small-scale: Has capital below IDR 5 billion, ideal for local startups.
• Medium-scale: Has a capital between IDR 5 to 10 billion.
• Large-scale/PMA: Has capital exceeding IDR 10 billion.

Process of Registering a Limited Liability Company

With the assistance from InCorp Indonesia (an Ascentium Company), starting an LLC in Indonesia will be a much simpler process compared to doing it yourself. There are some legal obligations you must meet and specific procedures you have to go through.

Firstly, your LLC need to be approved by the Indonesia Investment Coordinating Board (BKPM) and other relevant authorities in Indonesia. Once approved, you’ll receive the necessary business licenses to operate legally in Indonesia. Here are more details regarding the process:

1. Contact InCorp to consult about your business structure, goals, and sector eligibility based on the Positive Investment List
2. Get foreign legal documents (passport, incorporation certificate, etc.) that are certified
3. Translate documents to Indonesian
4. Reserve your company name and draft the Deed of Establishment to be signed before a public notary
5. Obtain Investment Approval (NIB) and business license from BKPM through the submission at InCorp
6. Lease a physical or virtual office address in Indonesia
7. Get tax registration ID (NPWP)
8. Open a corporate bank account
9. Publish your business at the Online Single Submission (OSS) system through InCorp

Register LLC with InCorp

If you’d like to taste the fruits of your successful business in Indonesia, now is the right time to establish your limited liability company in Indonesia. InCorp Indonesia (an Ascentium Company) is an international company with an experienced team of advisors who will assist you during your market penetration in Indonesia. We provide one-stop market entry solutions that cover advisory, consulting, assistance during a company registration and handling the process on your behalf.

For a free quotation or more information in regards to starting a limited liability company in Indonesia, contact us now.