Establishing a Business in Indonesia ‚Äì Business Vehicles
By Ira A. Eddymurthy and Revaldi N. Wirabuana
The main business vehicles in Indonesia are legal entities and business entities. In a legal entity, there is a separation between the assets of the founder(s) and that of the established entity, which is not the case in a business entity. Establishing a legal entity requires the approval of several government entities, while establishing a business entity only requires registration with government entities.
Examples of legal entities include:
- Limited liability companies (Perseroan Terbatas (PTs)).
- Pension funds.
Business entities include civil partnerships, firms (a type of partnership), representative offices, permanent establishments, and limited partnerships (Comanditer Venootschap (CVs)).
The main form of business vehicle used in Indonesia is the PT. A PT is a legal entity comprised of shares that must be established by at least two shareholders. The PT is the most common form of business vehicle because of the limited liability of shareholders and a clear capitalisation regime. A PT can be a publicly listed company or a privately-owned company.
A PT is the most common form of business entity used in Indonesia and is generally preferred because the liability of shareholders is limited to their capital contribution. Additionally, the boards of directors and commissioners of a PT cannot be held liable for any corporate decision adopted in good faith, therefore affording greater protection to the parties involved.
This first appeared in Establishing a Business in Indonesia, published by Thomson Reuters Practical Law. You can find the full chapter here.
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