The Most Common Mistakes When Setting Up a Foreign Company in Indonesia

Everything you need to avoid while incorporating a foreign company in Indonesia.

Incorporating a company in Indonesia – especially a foreign company – can be a long and complicated process. This complexity is why it’s common for people to make mistakes when building a company in Indonesia.

But missteps like these can cost you more time and make your entry process even more difficult. Here are some usual mistakes people do when incorporating in Indonesia and how to avoid them.

Not researching your business field correctly.

An important step in setting up a foreign company in Indonesia is carefully deciding exactly which business field you want to focus on.
An important step in setting up a foreign company in Indonesia is carefully deciding exactly which business field you want to focus on.

You might think a company should be able to have flexible activities and be open to introducing more products down the line. But in Indonesia, this is a bit more complicated.

Before starting the incorporation process, you should clearly decide what business field you’re going to register as. This is important because your business field might be closed or restricted to foreign investors.

If you want to do business in Indonesia, you should research Indonesia’s Negative Investment List and see if your field is available. Other than that, you can also contact an experienced consultant to help review the list with you and discuss options if your field isn’t open.

Not having enough capital.

Featured Image - Minimum Capital in Indonesia
A company should be aware of Indonesia’s minimum capital requirements before starting to incorporate it.

Minimum capital is another usual concern for aspiring foreign investors. Many entrepreneurs plan to invest in Indonesia without having the proper funds or investment plan, which would severely complicate things.

A foreign company in Indonesia needs to submit at least ±USD 170.000 of paid-up capital and plan to invest at least ±USD 10 billion in total. This rule applies to PT PMA companies, which is the type of foreign company that’s allowed to generate revenue.

The best solution to this problem is to prepare the necessary amount of minimum capital. But if you’d still like to build a presence in Indonesia without that amount of money, there are some options you could consider.

Not having a business address.

Greenhouse Coworking Space in Jakarta, Indonesia aims to be environmentally-efficient by using natural materials, natural light, and waste recycling.
You need an official address to register a company in Indonesia. It can be a virtual office or a physical location in a commercial area.

Any business seeking to set up in Indonesia needs to submit an official address in a commercial area. This part of the process is usually more straightforward than the others, but can still delay your incorporation if you’re not aware of it.

However, this address is only for mailing and administrative purposes; it doesn’t have to be your actual working location. So, virtual office services are popular with businesses that work remotely. With a virtual office, you can register a commercial building as your official address without having a physical space there.

Keep in mind that some business fields aren’t allowed to use virtual offices. If this is the case, then your most practical options are getting a physical office or a dedicated desk in an office building.

Not sparing enough time.

To be safe, a foreign company should start incorporating two months before the time they plan to do business.
To be safe, a foreign company should start incorporating two months before the time they plan to do business.

There’s no getting around it. Market entry agencies can make things much simpler for you, but setting up any company in Indonesia isn’t quick. Coordinating between different government offices will still take a lot of time.

If you plan to invest in Indonesia, don’t expect to have your new company up and running by next week. To be safe, we advise you to spare at least two months for your business incorporation process. You can expect to officially have your new business about eight to ten weeks after you’ve started the process.

Okay, so what’s the next step?

Knowing these mistakes will help you avoid them, but they’re not the only things that could go wrong. You still have to consider a lot of stuff from regulations, funds, to logistics, and it might be hard to keep track of everything.

We advise that connecting with specialists who know how to the market entry process is still the most straightforward option for you. However, it’s not a good idea to hand everything over to them. Knowing the basics of the process will help you and your service provider stay on top of things.

Greenhouse Connect is a marketplace platform that allows you to book business incorporation services and connect with market entry consultants in your target markets.

We’ll connect you with experienced consultants on the ground who can help answer your questions about doing business in Indonesia.