There are 2 types of association/organization that existed in Indonesia, The first is profit organization, and the second is non-profit association/organization.
The first is Profit Organization or well known as firm, company or corporation. This type of organization is focus on gain profit as its main purpose. For foreign entities, information regarding establishing a foreign company in Indonesia can be seen here.
The second is the Non-profit Association/Organization. This organization definitely does not seek profit. Instead, the main purpose of this organization can be defined in terms of social, political, cultural, educational and other non-profit goals. For foreign entities, establishing a non-profit organization can be confusing due to several changes in government regulation.
However, if we have a systematic understanding regarding the recent regulation and the process in Indonesia, it does not as blurred as it is seen. How is the outlook of a non-profit association and/or organization in Indonesia?
The Law Number 28 the Year 2004 regarding amendment of Law Number 16 the Year 2001 on Foundations defines a foundation as a non-membership legal entity, established based on the separation of assets and intended as a vehicle for attaining certain purposes in the social, religious, or humanitarian fields.
Foundation cannot have exclusive ownership. Instead, it only has a founder(s). The foreigner can be the founder of the foundation. As for the organizational structure, foundation governed by the Board of Trustees (Dewan Pembina), Board of Advisor (Dewan Pengawas) and Board of Management (Dewan Pengurus). The board of trustees have a right to decide strategic decision including appoint and discharge a member of advisor and management, approve and/or modify the foundation’s annual budget, approve the foundation’s program planning, and the decision to a merger or dismiss the foundation.
There are two types of associations in Indonesia including incorporated associations, which possess legal personality, and ordinary associations, which do not. Both are membership-based organizations which established due to the common identity or goals among its members. For instance are the Association of University Alumnus, Overseas Indonesian Student Association and Association for Indonesian Math Teacher.
The most association formed as a non-legal entity. But, if a certain association wants to form a legal entity, the association should prepare a registration letter to the Chairman of the District Court (Ketua Pengadilan Negeri) in the association’s resident. After the registration approved by the district court, the association’s allowed to request a ratification letter to Indonesian Ministry of Justice and Human Rights and announce it in Indonesian Legal Entity Administration System (BNRI).
Institute is a not-for-profit organization which aimed to achieve its goals in terms of education, social, culture and humanities. For instance are the Institute for National Strategy (LSN), Center for Strategic and International Studies (CSIS), etc. Institute cannot stand alone as a single legal entity. An institute can choose a form of its legal entity, whether it uses foundation, association or even corporation as its legal entity. Most of the non-profit institute is formed through foundation legal entity. It means that every institute has its own foundation to fund the institute’s day to day activity and program.
Institute’s organizational structure is depends on the main purpose and field of the institute. For instance is research institute. Research institute supposed to has a director, secretary, treasurer and its researcher member.
| No | Organization | Characteristic | Advantages | Disadvantages |
| 1 | Foundation (Yayasan) | 1. Should have a foundation’s legal entity 2. Recognized as independent entities 3. Do not have ownership, only founder(s) 4. Governed by Board of Trustees, Advisors and Management 5. Non-membership based organization | 1. Have independent wealth 2. Can funded other organizations 3. Can perform as independent entity in a court | 1. Takes more time to establish the foundation’s legal entity (especially if the founder(s) are foreigners |
| 2 | Association (Perkumpulan) | 1. Can be formed as a legal entity or non-legal entity 2. Membership-based organization | 1. The establishment process is faster for the non-legal entity association 2. Foreigner allowed to become founder | 1. takes more time to process the establishment of association with legal entity |
| 3 | Institute (Lembaga) | 1. Do not have an independent legal entity 2. Subsidiary organization of a foundation 3. the establishment process refer to the foundation’s establishment act | 1. Allowed to seek donation from donor organization | 1. Cannot give fund or grant to other organization of individual 2. Founder of the institute should be a foundation. |
Non-profit organization or Social Organization divided into (1) Social Organization with legal entity and, (2) Organization Social without legal entity. Both social organizations can be a membership-base organization and non-membership-base organization.
THINGS SHOULD BE PREPARED:
THINGS SHOULD BE PREPARED:
If you need further detail information about non-profit organization, feel free to contact Cekindo and free to contact Cekindo and we will help you to provide everything you need.
