Business entity can be defined as an institution with legal, economic and technical unity. There are many types of business entities that you need to know, both those with legal entities such as PT, foundations, and cooperatives, as well as non-legal entities such as CV and UD.
The advantages when you have a business entity besides legality, there are many advantages that can be obtained when your business has a business entity.
Here are some of them:
Evidence of Compliance with Legal Rules
Basically, all types of businesses in Indonesia have been covered by laws or regulations. Therefore, when a business has legality, you have complied with the applicable legal rules. This has indirectly succeeded in instilling a sense of responsibility, obedience and discipline in entrepreneurs. However, when it is legal, business entities will also be subject to other regulations such as taxes and so on.
Legal Protection
Apart from being proof of compliance with the law, the legality of a business entity will also automatically help you get protection. Businesses that already have a business license are guaranteed to be free from all acts of control and demolition. Your business will avoid all forms of lawsuits as a result of your business activities. So, indirectly the establishment of a business entity is the first step to create a sense of security and comfort for business activities.
Helping and Facilitating Business Development
In fact, the existence of legality and business permits will greatly assist business development. With it, you will have convenience when applying for loans or additional capital at banks / financial institutions. You will also easily expand your network by joining associations or associations of entrepreneurs. As is well known, to be able to join the organization requires a deed of establishment as the main requirement. So, indirectly, the legality of a business entity will also facilitate the development of your business.
Promotion Facilities
It should also be understood that when you take care of legal documents related to business activities, you have also carried out promotional activities. By recording your business license at the sub-district, sub-district office, and others, you indirectly have promoted administratively and in inventory. In that sense, when the business sector has been registered, everyone can access your business data at government agencies that oversee the type of business.
Furthermore, the capital source of business entities in Indonesia can be from domestic or foreign investment. Regarding foreign investment, here is some information about business entities as a foreign investment. PMA (Foreign Investment Company) according to Law Number 25 of 2007 (UUPM) is defined as an investment activity to conduct business in the territory of Indonesia which is carried out by foreign investors, either fully using foreign investment or the results of joint ventures with domestic investors.
The following points need to be taken into account when establishing a foreign investment company (PMA);
1. Company Business Scope
Understanding the company’s business sector is something that needs to be considered before establishing a PT PMA. This is because the business sector has an influence on the registration options that can be made, the provisions related to the Negative Investment List, as well as other sectoral provisions relating to the type of business concerned.
2. Negative Investment List (DNI)
DNI is a legal product created to make investors have clear choices regarding business scopes in Indonesia. In addition, DNI is also a PMA provision that distinguishes it from PT Penanaman Modal Dalam Negeri (PMDN). In relation to DNI, the Government divides business scopes in investment activities into 3 (Three), including:
a. Open Business Scopes
Business scopes that are carried out without requirements in the context of investment. In this business scope, it is possible to have 100% share ownership by foreigners.
Example: Restaurant.
b. Closed Business Scopes
Closed Business Scopes are certain Business Scopes that are prohibited from being operated as an Investment activity.
Example: Beverage industry contains alcohol
c. Open Business Scopes with Conditions
Certain business scopes that can be undertaken for investment activities with conditions, namely reserved for Micro, Small and Medium Enterprises as well as Cooperatives, Partnerships, capital ownership, certain locations, special permits, and investment from the Association of Southeast Asian Nations (ASEAN) countries.
Example: The palm oil industry.
Basically, all business scopes are open to investment activities, except those that are declared closed and open with conditions. This is determined by the provisions of the negative investment list as outlined in Presidential Decree 44/2016 that in certain business sectors there is a limit to the percentage of capital ownership that can be owned by foreigners.
3. Establishment based on Indonesian law
PMA must be in the form of a limited liability company based on Indonesian law and domiciled in the territory of the Republic of Indonesia, unless otherwise stipulated by law.
4. Nationality of the founder
In establishing the Company, it is necessary to have clarity regarding the nationality of the founder. Basically, Indonesian legal entities in the form of companies are established by Indonesian citizens or Indonesian legal entities. However, foreign citizens or foreign legal entities are given the opportunity to establish an Indonesian legal entity in the form of a Company as long as the law that regulates the Company’s line of business allows, or the establishment of the Company is regulated by separate laws. In the event that the founder is a foreign legal entity, the number and date of legalization of the founding legal entity are documents of the same kind, including but not limited to a certificate of incorporation.
5. Organizational structure
Based on the Limited Liability Company Law, it is determined that in a limited liability company there is a minimum of a Board of Directors, a Commissioner, and two Shareholders.
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