Setting up a clothing business in Bali is a popular choice among expatriates living on the island. However, there are several legal aspects to consider first – for example which legal entity to set up, which permits the building you operate has to have etc.
In this article, we help you prepare for what lies ahead if operating a clothing business in Bali.
Table of contents
Different types of clothing businesses in Bali
Clothing business is a broad term. In the scope of this article we cover the following business activities:
- Manufacturing clothing/garments
- Distributing the clothes to shops/other type of sellers
- Opening retail shop/boutique to sell branded items
- Opening an online store and selling worldwide
Here is the comparison between different business activities related to clothing business:
|Activity||Business classification (KBLI)||Maximum foreign ownership|
|Distributing the clothes to shops/other type of sellers||Distribution||67%|
|Opening retail shop/boutique to sell branded items||Retail Trade not in a Department Store||0%|
|Opening an online store||E-commerce||100%|
Clothing Manufacturing in Bali
Many foreign entrepreneurs move their manufacturing to Bali as manufacturing is less costly. There is a wide variety of fabrics available, and the work quality is good if you exercise sufficient quality check. Also, Bali with its magic nature and wilderness is perfect location to work on branding of the clothing business.
What many experience though is that starting a clothing business in Bali is not always as clear as it seems. This is mainly because the business lines that seem related to each other and be supplementary are often considered as the different business classifications by the government. It is important to plan in advance because often you would need to set up more than one legal entity, one for each business classification.
Get a facility with correct build permit (IMB)
One of the biggest challenges of renting or buying property for commercial purpose is to find a facility with the correct building permit (IMB). If you want to set up manufacturing in Bali your building must have a permit for „factory“. This is a crucial step and we strongly advise to avoid buildings with wrong permits because changing the wrong IMB is complicated and each district in Bali has its own additional restrictions to which areas can even be used for manufacturing.
It is common to partner with an existing manufacturing facility and use their licenses or even outsource the production. If you want to go through that route then Emerhub consultants can help you with finding the partners or checking that they have the correct licenses.
Business Classification for manufacturing in Bali
Manufacturing has its own business classification (KBLI). Note that if you set up manufacturing business you cannot combine it with other activities such as retail. For that you would have to open a separate company.
E-commerce Business Opportunities in Bali
E-commerce overall sees tremendous potential in Indonesia, including Bali. Many brick and mortar stores also open their own e-commerce sites to allow customers to purchase their goods from anywhere in the world. You can learn more about how to set up e-commerce in Indonesia.
Importing and Exporting Goods in Bali
One of the challenges of an e-commerce classification is that it doesn’t allow you to import or export goods. In order to do so you would have to apply for an additional business classification for ”trading” (both for import and export).
If you prefer not to deal directly with the customs and export matters, an alternative is to outsource it to a third party, also called undername import/export service.
Product Distribution in Bali
Many entrepreneurs enter the market in Bali with a line of products already set for distribution. There are a number of distributors on the market and a healthy flow of tourists.
You can register your distribution company for the business classification “trading” (thus you may import, export and distribute). By doing so, your company can conduct B2B sales, however sales to end users are prohibited.
Opening a Boutique in Bali
Bali is famous for its gorgeous boutiques and art. However, when opening up a boutique shop in Bali, it all begins with picking a boutique that meets necessary building permit requirements.
In this case, you need IMB with the function “shop”. Note that building permits are usually applied during construction stages already, thus when looking around for areas, always ask for relevant paperwork. Choosing to set up a shop in a place where there is no IMB or the function is different than required may cause difficulties in company set up.
When opening a boutique in Bali make sure to keep relevant classification in mind as well. You need to apply for the business classification “retail shop”. For this business classification 0% foreign ownership is allowed, unless you are opening a big department store. Hence, nominee company is a suitable solution.
Overview of Trading Structure in Indonesia
When setting up your business, start by figuring out its core function. After you have done so, you also know which classification you should register. Best practices show it is wise to start off by registering the most dominant business activity while afterwards it is an option to add necessary classifications.
Get in touch with Emerhub in Bali to discuss your opportunities of setting up a clothing business in Bali. Our consultants help you set up your company in Bali or find trustworthy cooperation partners amongst local wholesale clothing manufacturers.