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Setting up legal entity

Legal entities in Indonesia and Vietnam

Legal entity setup varies greatly from country to country. Company registration in Indonesia differs from company registration in Vietnam and there are some local regulations that affect foreign investors in Bali.

In the tables below we compare different legal entity types available to foreign investors in Indonesia and Vietnam

Legal entity types in Indonesia

Type Limited Liability Company with Foreign Direct Investment Local limited liability company Representative office Representative office for trading
Indonesian abbreviation

PT PMA

PT

KPPA

K3PA

Allowed activities Can conduct all business activities within the business field it got approval for Can conduct all business activities within the business field it got approval for Market researchLocal representation Local representation
Best option for Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia Local investors who are not involving any foreign shareholders
  • Foreign companies studying the market
  • Foreign companies who don’t need to earn revenue from Indonesia
Foreign trading companies that don’t need to earn revenue to their Indonesian entity
Foreign ownership restriction Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in Negative Investment List can be owned 100%.
  • Cannot have foreign shareholders.
  • Limited amount of work permits for foreigners depending on size of capital
No restrictions No restrictions
Minimum capital Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of investment plan.For some industries required capital is higher. Micro: Less than Rp.50 million
Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion
No capital requirement No capital requirement
Key benefits Can operate fully as an independent limited liability company within the business classification Smaller capital requirement and faster process as long as no foreign shareholders are involved.
  • No capital requirement
  • Easiest way to have a legal presence in Indonesia
 License can always be extended every 3 years
Key disadvantages
  • Large capital requirement
  • Ownership restricted or forbidden in some industries
No foreign shareholders
  • Cannot seek or earn revenue in Indonesia
  • Valid for maximum 5 years, and cannot be extended
 Not allowed to earn any revenue
Issuing work permits and visas for foreigners
  • All shareholders, directors and commissioners eligible for work permit
  • Unlimited amount of business visa sponsorships
  • Work permits can be issued to foreign experts
  • Only Medium Size PT can apply work permit for its foreign worker
  • Unlimited amount of business visa sponsorships
  • Work permit for the chief representative
  • Unlimited business visa sponsorships
  • 3 Indonesians for every foreigner hired
  • Work permit for the chief representative
  • Unlimited business visa sponsorships
  • 3 Indonesians for every foreigner hired
Additional required licenses
  • Permanent Business License from BKPM
  • Import license for importers
  • Additional operating licenses  needed for some industries
  • Import license for importers
  • Additional operating licenses for some industries
  • Representative office needs to be extended every 3 years
Compliance
  • Monthly withholding tax report
  • Quarterly/semi-annual investment reporting
  • Annual tax reporting
  • Monthly withholding tax report
  • Annual tax reporting
  • Monthly withholding tax report
  • Annual Activity report to BKPM
  • Monthly withholding tax report
  • Annual Activity report to BKPM
Time to register

~10 weeks

~8 weeks

~6 weeks

~6 weeks

Set up with Emerhub

PT PMA company registration 

Buat PT

Representative office

Representative office 

Legal entity types in Vietnam

limited liability company (llc) or joint-stock company (jsc)?
LLC JSC
Establishment timeframe Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment
Suitable for Small to medium sized business Medium to large sized businesses
Number of founders 1 to 50 founders At least 3 founders
Corporate structure
  • Members’ Council (General meeting)
  • Chairman of Members’ Council*
  • Director
  • Inspection Committee**
  • General Meeting
  • Management Board
  • Chairman of the Management Board
  • Director
  • Inspection Committee
Liability Founders’ liability is limited to the capital contributed to the Company Founders’ liability is limited to the capital contributed to the Company
Issuance of shares and public listing A Vietnamese LLC cannot issue shares and be pubicly listed on the local stock exchange A Vietnamese JSC can issue ordinary and preference shares, the shares can be listed on the public stock exchange

*Only required if the LLC has more than 1 founder
**Only required if the LLC has more than 11 founders
***Not required if the company has less than 11 shareholders and no shareholder holds more than 50 per cent of the shares, or if at least 20 per cent of the members of the Management Board are independent and these members form an independent auditing committee


 

Branch or Representative office?
Branch Representative Office
Registration timeframe Approximately 1 month Approximately 1 month
Suitable for Investors planning to conduct commercial activities and earn revenue without registering a separate legal entity in Vietnam Investors planning not to conduct any commercial activities and earn revenue, and who do not want to register a legal entity in Vietnam
Restrictions Parent company must be established for at least 5 years Parent company must be established for at least 1 year
Business activities Activities are limited to the activities of the parent company Activities are limited to market research and carrying out supporting roles such as finding trade investment opportunities and partners, advertising and promoting the parent company
Corporate structure At least one legal representative managing the branch’s day to day activities At least one legal representative managing the representative office’s day to day activities
Liability Parent company’s liability is unlimited Parent company’s liability is unlimited

Shelf companies

Shelf company is a company without any activities that was specifically created for the purpose of being acquired by an Emerhub client. While the total acquisition process is not shorter than setting up a greenfield company, it provides several benefits:

  • Shelf company already has an existing bank account, registered address and has correctly submitted all the necessary reports. This means you will be buying a company with a clean history that you can use to conduct business, participate in tenders, issue invoices etc.
  • Shelf company becomes available for doing business immediately after the purchase.

Shelf import companies

Shelf import company is an import company that has already acquired the necessary licenses to begin immediate trading activities. Get in touch with Emerhub to find out whether we have an available shelf import company for your products.

Nominee companies

 

Nominee company’s shareholders are Emerhub’s legal entities (local companies) and the shares are pledges on your behalf. This is beneficial in the following circumstances:

  • Industries where the foreign ownership is restricted or forbidden
  • If you don’t wish to own company under your name

Nominee company with proper set of legal agreements is the safest way to have somebody else hold shares in your company. You will have total control over the company and can transfer assets to other legal entities as you wish.

It is much safer practice than trusting local individuals to act as nominee shareholders who hold control over your company and could walk away with your assets at any time.

 

Get in touch with Emerhub consultants to discuss the most suitable form of legal entity for your business.