Type of Company in Indonesia: A Comprehensive Guide for Expatriates

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Starting a business in a foreign country can be challenging, especially when understanding the legal structures available. 

The type of company in Indonesia you choose determines your business’s legal framework, ownership rules, and operational scope. 

Indonesia offers various options for local and foreign investors, each with its own requirements, benefits, and limitations. 

Knowing these options is crucial for expatriates or foreign entities planning to enter the Indonesian market.

Indonesia’s business landscape is diverse, ranging from state-owned enterprises to individually owned businesses. 

Foreigners often face additional regulations, making it essential to select the most suitable legal entity. 

This article will explore the different company types available and help you navigate the registration process more effectively. 

Whether you are looking to operate a small business or invest on a larger scale, understanding these company categories will provide a solid foundation for your operations in Indonesia.

The Types of Companies in Indonesia

1. Local PT (PMDN)

A Local PT, or Perseroan Terbatas Penanaman Modal Dalam Negeri (PMDN), is a limited liability company fully owned by Indonesian citizens or legal entities. 

This is the most common type of company in Indonesia for domestic businesses. 

A Local PT must have at least two shareholders, a board of directors, and a board of commissioners. 

It is suitable for medium to large-scale businesses and can operate in almost all business sectors allowed by Indonesian law. 

Foreigners cannot own shares directly in a PMDN; they must partner with a local entity if they want to participate.

Read more: 

Property Ownership Laws for Expatriates in Indonesia

2. Foreign-Owned PT (PMA)

A PT Penanaman Modal Asing (PMA) is a limited liability company that allows foreign ownership. 

This is the preferred structure for foreign investors because it provides legal certainty and direct control over the business. 

A PMA requires at least two shareholders, which can be individuals or corporate entities, and a minimum paid-up capital that varies depending on the business sector. 

PMAs are allowed to conduct commercial activities and generate revenue in Indonesia. 

This type of company in Indonesia must comply with the Negative Investment List (DNI) to determine the level of foreign ownership permitted in a particular sector.

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3. Representative Office (KPPA)

A Kantor Perwakilan Perusahaan Asing (KPPA) is a representative office for foreign companies wanting to explore the Indonesian market without conducting direct sales or commercial activities.

This structure is ideal for market research, building networks, and managing local partners.

A KPPA cannot generate income directly, but it offers a simpler establishment process and lower operating costs. It is typically the first step before setting up a PMA.

Among the types of companies in Indonesia, KPPA is often used as a starting point before moving to a fully operational entity.

4. State-Owned Enterprises (BUMN: Perum, Persero)

Badan Usaha Milik Negara (BUMN) are state-owned enterprises where the Indonesian government holds full or majority ownership. 

There are two types: Perum, which operates for public service with profit as a secondary goal, and Persero, which focuses on profit-making while still serving national interests. 

These companies are usually in strategic sectors like energy, transportation, or infrastructure. 

Foreign investors can sometimes collaborate with BUMNs in joint ventures.

5. Private-Owned Enterprises (BUMS: Firma, CV, PT)

Badan Usaha Milik Swasta (BUMS) refers to privately-owned enterprises. 

These include Firma (partnerships with unlimited liability), CV or Commanditaire Vennootschap (limited partnerships with general and limited partners), and PT (limited liability companies). 

Among these, the PT is the most popular due to its clear legal separation between owners and the company. 

Foreigners typically cannot directly own shares in a Firma or CV, making them more suitable for local entrepreneurs.

6. Cooperative (Koperasi)

Koperasi are businesses owned and operated by their members, who share profits equally. 

They play an important role in supporting small communities and sectors like agriculture, retail, and savings and loans. 

Foreign investors usually cannot directly participate in cooperatives, but they may collaborate through partnerships. 

Koperasi must follow democratic principles and distribute profits based on member participation.

7. Social Enterprise

Social enterprises in Indonesia are businesses that aim to solve social or environmental problems while generating income.

These companies are often structured as PTs, CVs, or cooperatives but operate with a mission-driven approach.

They can attract foreign funding, but investors must align with the organization’s social goals.

Social enterprises have gained traction in recent years, particularly in sectors like education, renewable energy, and poverty alleviation.

This type of company in Indonesia is becoming more popular as businesses look to combine profitability with purpose.

8. Non-Profit Organization (Yayasan)

A Yayasan is a foundation or non-profit organization that focuses on religious, social, educational, or humanitarian activities.

It cannot distribute profits to founders or management, and all income must be used for the organization’s goals.

Foreigners can establish or participate in a Yayasan under certain regulations.

This structure is ideal for charitable projects and international NGOs operating in Indonesia.

Understanding this type of company in Indonesia is crucial for those aiming to run social or humanitarian initiatives.

9. Individually Owned Company

Individually owned companies are the simplest business form in Indonesia, typically used by small entrepreneurs.

The owner has full control but also bears unlimited liability for debts.

This structure is easy to set up and has minimal capital requirements, but it is less suitable for large-scale operations.

Foreigners are generally not allowed to register individually owned companies.

Among the types of companies in Indonesia, individually owned companies remain the most basic and accessible for locals.

Summary of Company Types

Understanding the types of companies in Indonesia you choose is essential for complying with local laws and maximizing your business potential. 

By selecting the right legal structure, expatriates can navigate Indonesia’s dynamic market more confidently and build a sustainable presence.