Type of business entity in Indonesia

In the business world, what is a business entity is a basic question that is often asked, especially by novice entrepreneurs. Understanding the understanding of business entities and its types is very important before starting or developing a business. This article will discuss in full about the classification and type of business entity in Indonesia, along with the advantages, weaknesses, and how to choose the most suitable for your needs.

Also read: PMA and PMDN are: understanding, differences and examples in the business world

What is a business entity?

Business entities are business entities in the form of legal entities or not in the form of legal entities established in the territory of the Unitary State of the Republic of Indonesia and conduct businesses and/or activities in certain fields. The definition is based on Article 1 number 9 of Law Number 6 of 2023 concerning the Establishment of Government Regulation in Lieu of Law Number 2 of 2022 concerning Work Copyright into Law (Law No. 6 of 2023).

Simply put, a business entity is a juridical and economical unity that aims to seek profits through production, distribution, or service supply activities. Business entities can be in the form of individuals or groups (companies), depending on the scale of business and its ownership structure.

Also read: How to Get IPR Protection Easily and Legally

Classification of business entities in Indonesia

Generally, the classification of business entities in Indonesia consists of business entities in the form of legal entities and business entities not in the form of legal entities:

1. Body body in the form of a legal body

The main characteristic of a business entity in the form of a legal entity is that there is a separation of wealth between the owner and the wealth of the business entity, so the owner is only responsible for the assets they have. For example, Limited Liability Companies (PT), Foundations, and Cooperatives.

2. Non -legal body

The main characteristic of a business entity that is not in the form of a legal entity is that there is no separation between the wealth of the business entity and the owner’s wealth. Examples such as, civil partnership (Partnership), Firm, and Commander of the Commander (CV).

Also Read: Management Responsibilities in Limited Liability Companies (PT)

Types of business entities in Indonesia and examples

Here are the most common types of business entities in Indonesia:

1. Individual company

Business entities owned and managed by one person. The owner has full control and is fully responsible for all company debt. For example, food stalls, grocery stores, independent service businesses, and others.

2. Civil Party (Partnership)

The fellowship established by two or more people to achieve shared goals with the aim of dividing the benefits derived from work carried out together, based on Article 1618 of the Civil Code (Kuhperdata), for example, namely the practice of a joint doctor.

3. Company federation

Founded by two or more people to carry out a business under one shared name, based on Article 16 of the Book of Commercial Code (KUHD). The members have a joint responsibility for the firm, according to Article 18 of the KUHD. For example, public accountant firms and legal consultant firms.

4. Commander’s alliance (CV)

CV was founded by two types of allies, namely active allies (complementary) who are full responsible and passive allies (commander) who only submit capital and are responsible for a paid -up capital, based on Article 19 and Article 20 of the Criminal Code. For example, medium scale trading businesses, and small contractors.

5. Limited Liability Company (PT)

PT is a legal entity which is a capital alliance, established based on agreements, carrying out business activities with basic capital which is entirely divided into shares or individual legal entities that meet the criteria for micro and small businesses as regulated in statutory regulations regarding micro and small businesses.

The definition is based on Article 109 number 1 of Law No. 6 of 2023, which changed article 1 number 1 of Law Number 40 Year 2OO7 concerning Limited Liability Companies. Almost all large companies in Indonesia, for example, PT Telkom Indonesia Tbk, PT Bank Central Asia Tbk.

6. Cooperative

Cooperatives are business entities consisting of a person or legal entity of cooperatives by based on their activities based on the principles of cooperatives as well as the people’s economic movement based on the principle of kinship, based on Article 1 of Law Number 1 of Law Number 25 of 1992 concerning Cooperatives. The aim is to prosper its members. For example, savings and loan cooperatives, village unit cooperatives (KUD), and consumer cooperatives.

Also read: How to Protect Trade Secrets in Business

Advantages and disadvantages of each type of body’s efforts

The following are the advantages and disadvantages of each type of body’s efforts:

Also read: Check out the rules and procedures for the establishment of cooperatives

How to choose the right type of business entity

In choosing the right type of business in accordance with the business you want to run, here are some things that can be considered:

1. Business and Capital Scale: For small businesses with limited capital, individual companies or CVs can be an option. For medium to large scale with significant capital needs, PT is more suitable.
2. Legal Responsibility: Determine the risk of risk, whether you want to be personal (unlimited responsibility) or want to limit your responsibilities (limited responsibility).
3. Number of Owners: Decide whether you will do your own business (individual) or with Mitra (alliance, PT).
4. Management flexibility: Determine how much control you want to have in business operations.
5. Taxation: Each type of business entity has different tax implications. You can consult with tax experts.
6. Ease of acquisition of funds: PT is easier to get an investment or bank loan because of its clear and transparent legal status.
7. Image and credibility: PT often has a more professional and credible image in the eyes of the client and investor.

Understanding what business entities is and its various types are important foundations before you go further in establishing a business. Choose carefully, consider your long -term goals, and don’t hesitate to consult with professional law or business consultants to get more specific guidelines according to your needs.

Also Read: What is the Procedure for Establishing a School? Check out this discussion

Online Legal Consultation in Perqara

If you have legal problems related to this problem, you can chat directly with professional advocates for free only in Perqara. Download the Perqara application now and get a free legal consultation to get the right legal solution anytime and anywhere.

Need help for the establishment of PT, CV, or Foundation?

In addition to providing information about the world of business law, Perqara also provides professional assistance services for the establishment of PT, CV, and Foundations legally and trusted. We are ready to help you start the first step in building a business entity with an easy, fast, and transparent process. Use the assistance service for the establishment of a business entity in Perqara now and get a free website and logo for your business!

Also read: How to take care of BPOM permit easily

(This article has been edited by the perqara editorial team)

Legal basis

1. Civil Code Book;
2. Trade law book;
3. Law Number 25 of 1992 concerning Cooperatives;
4. Law Number 16 of 2001 concerning Foundations as amended by Law Number 28 of 2004 concerning Amendments to Law Number 16 of 2001 concerning Foundations;
5. Law Number 40 of 2007 concerning Limited Liability Companies;
6. Law Number 6 of 2023 concerning the Establishment of Government Regulations in lieu of Law Number 2 of 2022 concerning Work Copyright into Law.

Reference

1. Yohana. Legal Responsibility for the Form of Legal Entity Business and Non -Legal Entity Business Form. Journal of Mercatoria, Vol. 8, No. 1, June 2015.