Point of this article..
- The Company Establishment Deed is the first document that legally validates your company and provides a legal basis for business operations.
- The Business Identification Number (NIB) simplifies the process of obtaining licenses and other administrative tasks, serving as the company’s digital identity.
- Business Licenses, SITU, and HO ensure that the business complies with sectoral and local regulations.
Want your startup to succeed and avoid legal problems? Business legality is key to running your business smoothly and growing without obstacles.
Starting a startup in Indonesia isn’t just about ideas and capital; it’s also about complying with applicable regulations. Complete business legality provides a strong foundation for your startup, ensuring your business operates legally and is trusted by investors, partners, and customers.
Company Establishment Deed: The Legal Foundation of Startup
Definition of Company Deed of Establishment
The company establishment deed is an official document declaring that the company has been established in accordance with Indonesia’s legal regulations. This document is prepared by an authorized notary and includes important information about the company, such as its name, address, purpose, capital, ownership structure, and management.
The establishment deed is the first document required to prove that your company is legally recognized. Without it, the company cannot apply for business licenses, open corporate bank accounts, or interact legally with other parties. Having this deed provides a solid foundation for every subsequent step in running your business.
Process of Creating the Establishment Deed:
The creation of an establishment deed involves several steps:
- Selecting a Notary: Choose an authorized notary to prepare the company deed.
- Drafting the Articles of Association: The articles of association include the company’s purpose, structure, and internal rules.
- Approval from the Ministry of Law and Human Rights: Once the document is drafted, it must be registered with the Ministry of Law and Human Rights for approval.
- Publication in a Newspaper: Some companies are also required to publish their establishment in a newspaper for transparency.
Business Identification Number (NIB): Digital Business Identity
Definition of Business Identification Number (NIB)
The NIB is an identification number issued by the Online Single Submission (OSS) system for companies that have registered and are legally recognized in Indonesia. The NIB replaces several previous business permits, such as the Trading Business License (SIUP), Company Registration Certificate (TDP), and the company’s Taxpayer Identification Number (NPWP).
Importance of NIB for Startups:
The NIB simplifies administrative tasks for startups, such as opening a corporate bank account, applying for business licenses, and fulfilling tax obligations. It also serves as the company’s digital identity within the OSS system, allowing access to various government services more efficiently.
How to Obtain an NIB:
To obtain an NIB, you must register through the OSS system by filling out a form that matches the chosen business sector. You will also need to complete supporting documents, such as company documents, NPWP, and proof of tax payments.
Business License: Official Permission to Operate in Specific Sectors
What is a Business License?
A business license is required for a company to operate legally. This license is sector-specific, meaning each type of business requires a different license based on the scope and activities conducted.
Types of Business Licenses Needed:
Some common business licenses that startups may need include:
- SIUP (Trading Business License): Required for businesses engaged in trading goods or services.
- IUI (Industrial Business License): Required for businesses in the manufacturing industry.
- Micro and Small Business License (IUMK): For micro and small businesses.
- Service Business License: For businesses in the service sector, such as technology, consulting, or finance.
How to Obtain a Business License:
Business licenses can be obtained through the OSS system by filling out the relevant form for the chosen business sector. You will also need to provide supporting documents such as company documents, NPWP, and proof of tax payments.
Location Permit (SITU)
SITU is required to ensure that the location of your business meets zoning regulations. Each region has zoning laws that determine where specific types of businesses can operate. For example, you cannot open a factory in a residential area without the appropriate permit from local authorities.
Disturbance Permit (HO):
HO is necessary for businesses that may cause physical disturbances, such as pollution or noise. Businesses with potential environmental or social impacts must apply for this permit to ensure they do not disrupt the local community.
Process for Obtaining SITU and HO:
- SITU: Apply at the local village or district office with documents proving ownership of the business location.
- HO: Apply at the relevant local government, with the process involving an assessment of the business’s impact on the environment.
Business Legality Checklist for Startups
Startups aiming for high professionalism and legal compliance need to fulfill various business legality requirements. Below is a list of essential documents and licenses with detailed explanations:
Ministry of Law and Human Rights Approval
After preparing the company establishment deed, the next step is to submit it for approval by the Ministry of Law and Human Rights (Kemenkumham). This approval is important for:
- Legal Entity Status: This gives the company an official legal status, separating personal assets from business assets.
- Operational Legality: Without this approval, the company is considered illegal, making it difficult to collaborate with investors and business partners.
The approval process is conducted online via the AHU Online system, and the company will receive a registration number, indicating its legal registration.
Company Registration Certificate (TDP):
TDP is an official document stating that a company is registered in the national company registry. It serves to:
- Facilitate audits and oversight: Allows the government to monitor the startup’s operations transparently.
- Operational Legality Requirement: Without TDP, a company cannot officially operate in Indonesia.
TDP registration is done at the relevant office in the company’s operating area, containing company details such as name, address, and business type.
Company Taxpayer Identification Number (NPWP):
NPWP is a tax identification number that companies must have. The primary difference between an NPWP for a company and an individual is that the company’s NPWP focuses on income and value-added tax (VAT) management.
Benefits of NPWP for Companies:
- Tax Compliance: Ensures that the company complies with Indonesia’s tax regulations.
- Ease of Administration: Often required for opening corporate bank accounts or applying for project tenders.
- Financial Transparency: Helps the company manage its tax reports systematically.
You can obtain an NPWP online via the e-Registration system of the Directorate General of Taxes (DJP) or directly at the local tax office.
Company Domicile Certificate (SKDP):
SKDP is a document proving the legal address of a company, typically issued by local authorities like the village or district office.
Key Function of SKDP:
- Validates the Business Address: Proves that the business location is legitimate.
- Supports Other Licensing Processes: Often required when applying for business licenses like NIB or Business License.
Special Permits from Relevant Authorities:
Startups in specific sectors, such as fintech, health, or transportation, may require additional permits from regulatory bodies:
- Financial Services Authority (OJK) for fintech startups.
- Ministry of Health for health-related startups.
- Ministry of Transportation for transportation startups.
These special permits ensure the business operates according to sector-specific regulations and standards.
Why Business Legality is Important for Startups
Business legality is not just a formality. Having all the required documents enables your startup to:
- Gain Trust from Investors and Partners: Legal compliance shows that your company has a strong legal foundation and is trustworthy.
- Avoid Legal Risks: Without legality, your business is vulnerable to lawsuits, which can hinder growth.
- Facilitate Business Expansion: With complete documentation, it’s easier to open new branches, secure funding, or form new partnerships.
Conclusion
Starting a startup requires more than just capital and a great idea; it also requires a solid understanding of the legalities involved. Every legal document, from the Company Establishment Deed to the Disturbance Permit (HO), plays a vital role in operating your business legally. Complying with these regulations offers numerous benefits, including boosting your business’s credibility with partners and customers, and preventing legal issues that could slow your growth. So, make sure to complete all the necessary legal steps and run your business the right way.
FAQ
- What is the Company Establishment Deed?
It’s a document declaring that a company is established according to Indonesian laws and regulations. - Do all companies need to obtain an NIB?
Yes, every company wishing to operate in Indonesia must register for an NIB through the OSS system. - What business licenses do startups need?
The necessary business licenses depend on the type of business, such as SIUP, IUI, or the Micro and Small Business License (IUMK). - What is the difference between SITU and HO?
SITU ensures that the business location complies with zoning regulations, while HO is required for businesses that may cause environmental disturbances. - What legal documents should a startup have?
A startup should have the Company Establishment Deed, NIB, business license, TDP, NPWP, SKDP, and special permits for certain sectors.