The island nation of Indonesia has become one of the most desirable locations for business processes. Indonesia has stable economic growth with their regulations continually being eased and erased. An example of this is the Omnibus law. This law introduces regulations that provide corporate tax cuts from 25% to 22%, which are meant to enhance corporate sector growth. Due to this, Indonesia’s startups, as well as large state-owned enterprises, are able to create more valuable stock market listings. Let us explore how limited liability company (LLC) formation services have risen and grown in Indonesia.
Type of LLCs
Perseroan Terbatas
In Indonesia, an LLC is known as a Perseroan Terbatas (PT). PTs are only available to local entrepreneurs and are a common business entity in Indonesian company incorporation. PTs have a wide range of characteristics, such as:
- A 2 shareholder minimum, which can be natural persons or companies
- A minimum of 1 director and 1 commissioner is required. The commissioner has to supervise the enterprise, examine the annual report and approve the budget put forward by the Board of Directors.
- Some businesses, such as restaurants, may require specific licenses.
- The company is required to be medium or large sized in order to sponsor foreign employees. The size is dependent on the share capital.
Seeing that the share capital determines the size of the company, there are three different options for the different sizes. For small sized companies, the paid up capital is between $3,500 and $35,000. For medium sized companies, the paid up capital is between $35,000 and $700,000. For large sized companies, the paid up capital is above $700,000.
Penanaman Modal Asing
In Indonesia, a wholly or partially foreign owned LLC is known as a Penanaman Modal Asing (PMA). PMAs are governed by the Foreign Capital Investment Law and are required to get approval from the Capital Investment Coordinating Board before it is permitted to conduct business in Indonesia. PMAs have a wide range of characteristics, such as:
- Depending on the type of business, the majority of the ownership may be foreign. But this ownership percentage is dependent on which industry the Indonesia company incorporation is in.
- A minimum 1 director, at least 2 shareholders and a commissioner is required.
- If the PMA is wholly foreign owned, the owners are legally required to sell at least 5% of the shares of the company to an Indonesian entity or person. This has to be done within 15 years of the enterprise being established.
- Depending on the activity of the Indonesia company incorporation, specific licenses may be needed from local authorities.
- Foreign owned companies are able to sponsor work permits and stay visas for their foreign employees.
- Although Indonesia allows foreign businesses, there are certain industries and sectors that foreigners are restricted from entering. They may be allowed to enter once they have met certain requirements to participate in.
The benefits of LLC formation in Indonesia
Forming an LLC, or rather a PT or PMA, in Indonesia provides a multitude of benefits. The island nation allows 100% foreign ownership of certain company types while granting favorable business conditions for importing goods. The country’s geographic location provides a strategic edge by making business with other ASEAN economies an efficient way to expand international business operations. Indonesia has concluded over 65 Double Taxation Treaties which has made the country an ideal location for international businesses while their continued foreign investment promoted the growth and development of their service sector.
LLC formation services in Indonesia
With Indonesia being a business-friendly company, LLC formation services have had the chance to grow and further their success. The formation of a PT or PMA in Indonesia is very similar to LLC services in the United States. To register a company in Indonesia, foreign investors are required to:
- Draft and investment plan to the Indonesian Investment Coordinating Board
- Deposit the share capital with a local bank
- Appoint the shareholders and the directors of the company
- Choose and register the local address of the company
- Prepare the Memorandum and Articles of Association of the company and file them with the Trade Register;
- Apply for business and the operational licenses
- Register for taxation and value added tax (VAT) purposes
Foreign investors do not have to do this alone. An LLC formation service, such as Company Formation Indonesia and INS Global, offers the assistance of local agents to help with the preparation of the documents required for setting up a company in Indonesia.
The Takeaway
The different types of business entities available in Indonesia cater to the needs of all types of businesses. They have large ranges of benefits, but also considerations, depending on the business’ needs. Business owners should reach out to LLC formation services based in Indonesia to help evaluate their options and choose the best fit. Some entrepreneurs opt to start an LLC on American soil if they meet the state requirements. For this reason a LLC in Florida may well be preferred, as mentioned by The Really Useful Information Company (TRUiC).
