How to Legally Open a Business in Indonesia – A Complete Guide by The Bali Lawyer
Opening a business in Indonesia offers immense opportunities, thanks to the country’s growing economy, large population, and strategic location in Southeast Asia. From small startups to large international companies, Indonesia continues to attract foreign investors and entrepreneurs who are ready to tap into this vibrant market.
If you are a foreigner or a local resident planning to start a company or expand your operations in Indonesia, understanding the legal requirements and procedures is crucial to ensuring your success. At The Bali Lawyer, we provide complete legal assistance and business consulting services for anyone looking to establish a business in Indonesia the right way.
Why Start a Business in Indonesia?
Indonesia is the largest economy in Southeast Asia and one of the most dynamic markets in the region. The country offers several benefits to entrepreneurs, including:
A young and growing population
Access to ASEAN markets
Steady GDP growth
Government incentives for investment
A diverse range of business sectors
With a stable economy and strategic trade location, Indonesia provides a promising environment for businesses ranging from tourism and real estate to digital services, export, and manufacturing.
Understanding Business Structures in Indonesia
Before starting your business, you need to choose the most suitable legal entity for your activities. The three most common business structures are:
1. PT PMA (Foreign-Owned Company)
This is the most common legal entity for foreigners. A PT PMA allows foreign individuals or companies to have partial or full ownership depending on the business sector.
2. Local PT (Locally-Owned Company)
A Local PT is owned entirely by Indonesian nationals. Foreigners cannot directly own shares in a local PT but may collaborate through nominee arrangements (with legal caution).
3. Representative Office
This is a limited setup for foreign companies wishing to explore the market without engaging in direct commercial activities. It cannot generate revenue in Indonesia but can be used for marketing, research, or liaison purposes.
Each structure has its own legal implications, capital requirements, and operational limitations. Choosing the right one is critical and should align with your business goals, ownership expectations, and compliance needs.
Steps to Legally Open a Business in Indonesia
1. Determine the Business Sector and Restrictions
Indonesia’s Negative Investment List outlines which sectors are open, restricted, or closed to foreign investment. Understanding this regulation is essential to know whether your business can be 100% foreign-owned or requires an Indonesian partner.
2. Reserve a Company Name
The name of your company must be approved and reserved with the Ministry of Law and Human Rights. It must be unique and not already in use.
3. Establish Legal Entity
For PT PMA or Local PT, articles of association must be drafted and notarized before being submitted for approval by the Indonesian Ministry of Law and Human Rights.
4. Obtain a Business Registration Number (NIB)
The Online Single Submission (OSS) system is used to acquire the NIB, which serves as your official business registration number and allows access to other permits and licenses.
5. Register for Tax ID and Obtain Company Domicile Letter
You must register for a Taxpayer Identification Number (NPWP) and obtain a domicile letter that certifies the address of your company in Indonesia.
6. Apply for Sector-Specific Licenses
Depending on the industry, your business may require additional permits such as tourism licenses, import/export permits, or health and safety approvals.
7. Set Up a Company Bank Account
You must open a corporate bank account under the company’s legal name to manage finances and receive investment funds.
8. Comply With Reporting and Tax Obligations
Companies in Indonesia must file monthly and annual tax reports and adhere to labor regulations, financial reporting, and immigration compliance for foreign employees.
Important Legal Considerations
Starting a business in Indonesia is not just about paperwork. There are ongoing legal obligations that you must understand:
Capital Requirements: For a PT PMA, minimum paid-up capital requirements apply, which vary by sector.
Licensing: Some sectors need regional or national-level permits depending on your operations.
Labor Law: Indonesian employment law protects workers’ rights, so contracts, salaries, and working conditions must comply.
Visa and Work Permits: Foreign directors or staff must have the proper work permits (KITAS) and visas to work legally in Indonesia.
Taxation: Monthly VAT, income tax, and annual reporting obligations are strictly enforced.
It is essential to work with a professional legal advisor like The Bali Lawyer to ensure full compliance and avoid any penalties or delays.
Can Foreigners Own a Business in Indonesia?
Yes, foreigners can legally own and operate a business in Indonesia through a PT PMA. Depending on the sector, you may be allowed 100% ownership or required to partner with an Indonesian shareholder. It is critical to consult with legal professionals to confirm ownership limits and avoid hidden risks.
Common Sectors for Foreign Business in Indonesia
Indonesia has opened several key sectors to foreign investment. Some of the most popular industries for foreign entrepreneurs include:
Tourism and Hospitality
Real Estate Development
Import and Export
Technology and E-Commerce
Education and Language Services
Food and Beverage Industry
Health and Wellness
Renewable Energy
Each sector may have different licensing requirements and ownership regulations.
Why Work with The Bali Lawyer?
At The Bali Lawyer, we specialize in helping clients navigate Indonesia’s legal landscape. With years of experience handling company formation, permits, and immigration, we provide personalized legal support for businesses of all sizes.
We offer:
Step-by-step legal consultation
Business registration and licensing support
Document preparation and legal compliance
Visa and work permit assistance
Ongoing legal advisory and representation
Our deep understanding of local and national regulations ensures your business is established legally, efficiently, and without unnecessary complications.
How Long Does It Take to Set Up a Business in Indonesia?
The timeline depends on the type of company, sector, and documentation readiness. With complete documentation and legal support, setting up a PT PMA can take several weeks. However, delays often occur without proper legal guidance, especially in licensing or immigration processes.
Opening a Business in Bali vs Other Regions
While Jakarta is Indonesia’s business capital, Bali has become an attractive destination for entrepreneurs in tourism, hospitality, and creative industries. The process of company registration is similar across provinces, but regional offices may apply slightly different procedures for permits or regulations.
Working with a local law firm like The Bali Lawyer ensures that you receive support tailored to Bali’s unique business environment, while staying compliant with national law.
Opening a business in Indonesia can be a highly rewarding venture if done properly. Legal compliance, business structuring, and permit acquisition must be handled carefully to ensure long-term success and avoid legal complications.
Whether you are starting a small business, opening a representative office, or launching a foreign investment company, The Bali Lawyer is here to guide you through every step of the process. Our goal is to make your business journey in Indonesia smooth, lawful, and successful.
If you are ready to start your business in Indonesia, reach out to The Bali Lawyer today and schedule your consultation. We will help you turn your business vision into reality—legally and confidently.