5 Legal Mistakes to Avoid for First-Time Entrepreneurs in Indonesia

To all first-time entrepreneurs starting a business in Indonesia, here are the 5 legal mistakes to avoid for smooth operation.

The life of a startup is often rocky and uncertain. This is why a small mistake can lead to disastrous results and turn your entrepreneurial dreams into a nightmare. When starting a business in Indonesia, no matter the industry you’re in, laws and regulations are always part of the process.

If you are an entrepreneur setting up the groundwork for your business, you need to look at legal issues carefully and thoroughly to position your business for success.

So, for all business owners especially those starting a business in Indonesia for the first time, do not commit the 5 legal mistakes that we are going to discuss in this article.

5 Legal Mistakes to Avoid when Starting a Business in Indonesia

1. Pick the Wrong Business Structure

You should always spend time looking at what kind of business structure is suitable for your business. Your business may be small right when you’re just starting a business in Indonesia.

However, you need to envision the possibility of growth in the future. If you choose the wrong business structure, you will likely be in some sort of legal complications in the future.

So, remember, pick the right one. There are three common types of business entities in Indonesia: local company (PT), foreign-owned company (PT PMA) and representative office.

A local company has been solely owned by an Indonesian citizen. However, a foreigner can start a PT through Special Purpose Agreement. A PT PMA is the most common form of legal entity for foreigners with maximum foreign ownership up to 100% (subject to Negative Investment List). And, a representative office is suitable for foreigners doing market research or promotion for their parent company before starting a PT PMA in Indonesia.

2. Not Obtaining the Right Licenses and Permits

When starting a business in Indonesia, not getting the right permits and licenses means that you are crossing the legal lines and would face legal consequences such as fine or operation suspension.

Common types of license and permit in Indonesia include a business license, import license, distribution license, and others. A business license is the most important one and can be applied through the Online Single Submission (OSS) system. One day after the registration is done at OSS, you will get a Business Identity Number for your business.

3. Not Drafting Agreements

Special Purpose Agreement, non-disclosure agreement, property lease agreement, and sale and purchase agreement are the most common agreements you will see and need in Indonesia based on your business activities.

Failure to have necessary agreements that help establish rules and guidelines can put your business in conflicts among parties involved in the future.

4. Forgoing Intellectual Property Protection or Trademark

Not protecting your intellectual property is considered the biggest pitfall for your business.

Be it the brand name, logo, designs, creations, operating methods, etc., you need to apply for the trademark or copyright right away before the protection comes into effect and anyone else steals them.

Don’t wait until your intellectual property has been infringed because by that time you will either lose them or spend a lot of time, money and effort on dealing with the infringement.

5. Engaging an Inexperienced Lawyer

An inexperienced lawyer may not be able to look for the loopholes in your business operations and put your company in danger. A lawyer who doesn’t know the tricks of the trade will not help your business go a long way.

Consult with Cekindo & How Cekindo can Assist

Cekindo is a team of rеgіѕtered professionals who аrе result-oriented and we strive to bring the dreams of аѕріrіng еntrерrеnеurѕ and businesses to life.

We bеlіеvе in helping you not only with process paperwork and documentation for starting a business in Indonesia, but аlѕо providing you wіth thе necessary solutions and tools to develop, grow аnd expand your buѕіnеѕѕ.

We work closely with all governmental and private sectors with strong connections, ensuring your business setup in Indonesia more effectively and smoothly.

Cekindo is your unique business consultant for starting a business in Indonesia, and we want to make a difference for you.

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Pandu Biasramadhan

Pandu is the Consulting Manager at Cekindo. He has extensive experience in working with government agencies. Notably, he has provided market-entry solutions for enterprises in Indonesia and managed regional partnership channels in Southeast Asia. At Cekindo, Pandu aspires to lead the consulting team to provide top-quality market-entry services and maintain a portfolio of global clientele. His specialty is market-entry advisory and business process outsourcing.