The Forms of Business Entities in Indonesia

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THE FIRST STEP TO RUNNING A BUSINESS is to determine the form of business entity that will overshadow the business – in addition to determining the business strategy, of course. This is primarily to determine who the investors are and what roles and responsibilities of the people involved in it. If you only intend to open a business selling meatballs, then you do not need to bother setting up Company Liability Limited (LTD) – you simply make meatballs carts and hung billboard in front of the store. But for the sake of your future business developments will also need to be prepared to plan a LTD – anticipate your business that would develop into the franchise. According to the law, based on capital and the business owner’s responsibility, the forms of business in Indonesia consists of Sole Proprietorship, Partnership, Firma, Commanditaire and Company Liability Limited .

Sole Proprietorship

Sole Proprietorship is the simplest form of business entity. Sole Proprietorship owner and its formation is only one person without permission and complex procedures – for example, opened a grocery store or diner. Sole Proprietorship is usually made ​​by small entrepreneurs with capital resources and limited production quantity. This type of business form most easily established, as well as dissolution is easy to do – it does not require the approval of the other party. In a Sole Proprietorship the owner’s responsibility is not limited, so that any repayment of debt incurred to be borne by the owner of the private property – as well as all the benefits that can be enjoyed by the business owner.


If you feel your business has grown and need to develop it further, then it ‘s time to you to find a new business partner to increase the Sole Proprietorship. Partnership regulated in the Civil Law (Civil Code). According to the Civil Code Article 1618, Partnership is an agreement in which two or more persons bind themselves to put something in Partnership with the intent to share profits going hence. According to the aforementioned article, Partnership requirement something influx into Partnership (inbreng), and there is also a profit sharing of the results of that income. A Partnership made ​​under the agreement by the parties to set it up. In the agreement, the parties promised to put capital into the Partnership, and divided the profits between them. Partnership agreement can be simple made, and the process does not require complicated procedures  – Partnership agreement can even be made ​​verbally .


A firm is a Partnership with specialized form, which was set up to run the company, using the joint of name and caried joint responsibility. Because the Firm is an agreement, then the owners of the firm must consist of more than one person. Each ally on the Firm have to participate actively to running the company, and in order to run the company they are responsible jointly. The debt that created by one of the allies would bind the other allies and vice versa – as well as the repayment of debt by one ally will free up the other ally. Responsibilities of the ally are not only limited to the paid-in capital into the Firm, but also covers all personal property of the ally.

According to article 22 of the Commercial Code, the Firm agreement have shaped an authentic deed – notarial deed. Although to be an authentic deed, the absence of such a deed can not be a reason to harm a third party. The absence of an authentic deed can not be used by the allies as a reason to deny the existence of the Firm. After the deed Firm created, the deed must be registered at the District Court in the area of law in which the Firm is domiciled .

Commanditaire ( Commanditaire Vennotschaap/CV )

In principle, Commanditaire is a Firm – further development of the Firm. If the Firm consists only of the partners who are actively running the company, then the passive ally in Commanditaire just entering the capital. If the Firm needs additional capital, the Firm can enter the other party as new allies include only capital but are not actively involved in running the company. In this case, the new partner is a passive ally, while the ally who runs the company is the general partner. If the general partner runs the company and bear the losses to private property, the responsibility of passive ally limited to the inclusion of capital into the company – do not cover personal possessions.

Limited Liability Company (LTD)

Limited Liability Company (LTD) is a legal entity which is a capital alliance, established under the agreement, and conduct business with authorized capital divided into shares entirely. As a legal entity, a LTD is considered as individuals who can perform legal acts themselves, have their own property and sue and be sued in court. To make it as a legal entity, a company must follow the procedures for creation, registration and announcement as stipulated in Law No. 40 of 2007 regarding Limited Liability Company.

As a capital alliance, a LTD was founded by the founders who each enter capital under the agreement. The capital is divided into shares, and each share having value as a whole became the capital of the company. The responsibility of the founders of LTD is limited to the paid-up capital in and do not cover their personal possessions. According to the Company Law, the capital consists of Authorized, Issued and Paid-up Capital. Authorized capital is the total capital of LTD as stated in its Articles of Association, which is a value that indicates the value of the company. Issued capital is part of the authorized capital shall be paid by each of the shareholders into the company, while the total issued paid-in capital was obvious that had been deposited .

To run a company, a LTD comes organs have their respective functions, namely: General Meeting of Shareholders (GMS), the Board of Directors and the Board of Commissioners. According to Company Law, the General Meeting of Shareholders is the organ of the company that does not have the authority granted to the Board of Directors or the Board of Commissioners. In general, the function of GMS is to determine the policy of the company. The company’s Board of Directors is authorized organ and take full responsibility for the management of the company, so that the Board can represent the company both inside and outside the court. BOC task is to supervise the company, both in general and in particular, including advising the Board of Directors.