Bali is a paradise not only for travelers but also for entrepreneurs. With its thriving tourism industry, growing economy, and unique culture, Bali offers ample opportunities for foreigners to start and operate successful small businesses. However, starting a business as a foreigner in Bali involves navigating Indonesian laws and regulations, and it’s essential to have a clear understanding of the legal requirements to ensure your business is fully compliant.

At The Bali Lawyer, we specialize in helping foreign entrepreneurs establish and grow their businesses in Bali. Our team of legal professionals provides comprehensive support throughout the process, from understanding local regulations to registering your business and ensuring ongoing compliance. In this guide, we’ll cover everything you need to know about starting a small business in Bali as a foreigner.

Why Bali is Ideal for Foreign Entrepreneurs

Bali’s vibrant economy and steady flow of international tourists make it an ideal location for foreign entrepreneurs looking to start small businesses. Some of the key reasons why Bali is a top choice include:

• Tourism Industry: Bali attracts millions of visitors each year, making it a prime location for businesses in hospitality, tourism, retail, and dining.
• Low Operating Costs: Compared to other popular business hubs, Bali offers lower operating costs, including affordable rent and labor.
• Growing Expat Community: Bali has a large and growing expat community, providing opportunities to cater to both local and international customers.
• Government Support for Foreign Investment: Indonesia actively encourages foreign investment, offering opportunities for foreigners to establish businesses through specific legal structures.

While Bali provides a great environment for business, it’s essential to understand the legal framework and requirements before starting a small business as a foreigner.

Legal Structures for Foreign-Owned Businesses in Bali

Foreigners looking to start a small business in Bali can choose from several business structures, each with its own set of legal requirements. Understanding the available legal structures will help you select the most appropriate one for your business.

1. PT PMA (Foreign-Owned Company)

The most common and suitable business structure for foreigners is the PT PMA (Perseroan Terbatas Penanaman Modal Asing), which allows for foreign ownership. A PT PMA is a limited liability company that grants foreigners the legal right to own and operate businesses in Indonesia, either as full or partial owners, depending on the sector.

• Foreign Ownership: Depending on the business sector, foreigners can own up to 100% of the company’s shares.
• Minimum Capital Requirement: PT PMAs require a minimum capital investment of IDR 10 billion (approximately USD 700,000), although the required paid-up capital may vary depending on the business type.
• Legal Benefits: A PT PMA allows you to own property in the company’s name, hire foreign employees, and operate legally in sectors open to foreign investment.

2. Local Nominee Arrangement

Some foreigners opt to partner with a local Indonesian citizen through a local nominee arrangement. In this structure, the business is technically owned by the local partner, but agreements are in place to protect the foreign investor’s interests. While this option is less expensive upfront, it carries certain risks, as the foreigner does not have full legal ownership of the business.

• Risk Factors: There is a risk that disputes may arise, as the foreigner does not have legal ownership. It is essential to have legally binding agreements in place.

3. Joint Venture with Local Partners

Another option for foreign entrepreneurs is to enter a joint venture with an Indonesian partner. In this structure, the foreign and local partners jointly own and manage the business. The joint venture allows for shared investment and risk while giving the foreign partner partial ownership of the business.

• Ownership: The foreigner and the local partner share ownership according to the agreed-upon terms.
• Legal Protection: A joint venture agreement can provide legal protection and clear guidelines for both parties.

Steps to Start a Small Business in Bali

Setting up a small business in Bali as a foreigner involves several steps, from choosing the right business structure to registering the company and obtaining the necessary licenses. Here’s a step-by-step guide to help you navigate the process:

Step 1: Choose the Right Business Structure

The first step is to decide which legal structure is most suitable for your business. If you want full legal ownership and the ability to operate your business independently, a PT PMA is likely the best option. For smaller businesses with local partnerships, you might consider a joint venture or nominee arrangement.

At The Bali Lawyer, we can help you assess your options and choose the right business structure based on your business goals and investment plans.

Step 2: Conduct a Feasibility Study

Before moving forward, it’s important to conduct a feasibility study to evaluate the potential of your business in Bali. This includes:

• Identifying your target market and competition.
• Assessing the costs of operating the business (e.g., rent, salaries, equipment).
• Determining the legal requirements for your business sector.
• Understanding the local market and consumer preferences.

A well-conducted feasibility study will give you a clear idea of the viability of your business and help you plan accordingly.

Step 3: Reserve Your Business Name

Once you’ve chosen a legal structure and conducted a feasibility study, the next step is to reserve a unique business name. The business name must comply with Indonesian company regulations, which require it to be in Roman letters and contain at least three words.

We assist with checking the availability of your business name and reserving it with the Ministry of Law and Human Rights.

Step 4: Prepare the Deed of Establishment

For a PT PMA, you will need to create a Deed of Establishment that includes the company’s articles of association, details of the shareholders, and the company’s capital structure. The deed must be signed by a notary in Indonesia and submitted for approval by the Ministry of Law and Human Rights.

At The Bali Lawyer, we handle the preparation of the Deed of Establishment, ensuring that all necessary legal requirements are met.

Step 5: Obtain a Business Identification Number (NIB)

After the Deed of Establishment is approved, your business will need to be registered through Indonesia’s Online Single Submission (OSS) system to obtain a Business Identification Number (NIB). The NIB serves as your company’s official registration number and is required to operate legally in Indonesia.

The OSS system also provides other important documents, such as:

• Company Registration Certificate (TDP): Official proof of your business’s registration.
• Sector-Specific Licenses: Depending on your business activities, you may need additional licenses or permits.

We manage the entire registration process on your behalf, ensuring that your business is officially registered with all the required documents.

Step 6: Open a Corporate Bank Account

You will need to open a corporate bank account in Indonesia to deposit your company’s initial paid-up capital. The paid-up capital for a PT PMA is typically IDR 2.5 billion (approximately USD 175,000). The funds must be deposited into the company’s bank account before the business can begin operations.

We assist you in setting up a corporate bank account with a reputable Indonesian bank, ensuring that the process is smooth and compliant with legal requirements.

Step 7: Obtain the Required Business Licenses

Depending on the nature of your business, you may need to obtain specific licenses or permits to operate legally in Bali. For example, businesses in tourism, food and beverage, or retail may require sector-specific licenses.

The Bali Lawyer provides assistance in obtaining the necessary business licenses and ensures that your company complies with all local regulations.

Step 8: Register for Tax (NPWP)

After your business is officially registered, you will need to obtain a Tax Identification Number (NPWP) from the Indonesian tax authorities. The NPWP is required for paying taxes and ensuring compliance with Indonesian tax laws.

We handle the tax registration process, ensuring that your business is fully compliant with local tax regulations from the start.

Step 9: Hire Employees and Obtain Work Permits

If you plan to hire employees, whether local or foreign, you must comply with Indonesian labor laws. For foreign employees, you will need to obtain work permits (KITAS). Our team provides full assistance with employment contracts, work permits, and labor compliance to ensure your business operates legally and smoothly.

Ongoing Legal Compliance for Small Businesses in Bali

Once your business is up and running, it’s important to stay compliant with Indonesian laws and regulations. This includes submitting annual reports, paying taxes, and renewing business licenses.

At The Bali Lawyer, we provide ongoing legal support to ensure that your business remains compliant with all relevant regulations. Our services include:

• Annual Financial Reports: We assist with submitting financial reports to the Ministry of Law and Human Rights.
• Tax Compliance: Our team helps you navigate Indonesian tax laws, including filing corporate taxes, VAT, and payroll taxes.
• License Renewals: We ensure that your business licenses and permits are renewed as required, so you can continue operating legally.

Why Choose The Bali Lawyer for Your Small Business Setup?

Setting up a small business in Bali as a foreigner involves several legal steps and procedures. At The Bali Lawyer, we simplify the process by providing expert legal assistance at every stage. Our team of experienced lawyers ensures that your business is fully compliant with Indonesian laws, allowing you to focus on growing your business.

Here’s why clients choose The Bali Lawyer for their business setup needs:

• Expert Knowledge: We have extensive experience in Indonesian business law and can guide you through the entire process.
• Personalized Service: Our solutions are tailored to your specific business needs and goals.
• Fast and Efficient Process: We handle all the paperwork and legal procedures, ensuring a quick and hassle-free business setup.

Contact The Bali Lawyer for Small Business Setup in Bali

Ready to start your small business in Bali? Contact The Bali Lawyer today for expert legal assistance. Our team is here to guide you through every step of the process, ensuring that your business is established legally and successfully.