Common Mistakes When Setting up a Company in Bali

Starting a business in Bali? One misstep in your company registration can cost you valuable time, money, and even your investments. From misclassifying your business activities to rushing into incorporation before compliance systems are in place, foreign investors often underestimate how quickly small oversights can escalate into operational roadblocks and legal risks. 

This guide breaks down the most common mistakes foreign investors make when setting up a company in Bali and how you can avoid them.

Before You Register, Identify the Red Flags

1. Misclassifying Your Business with the Wrong KBLI

A KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) code is the Indonesian government’s five-digit standard for classifying business activities. This code is the single most important element of your company’s legal identity because it is directly linked to your NIB (Nomor Induk Berusaha), the foundational license required to operate in Indonesia. This means your entire legal right to operate, issue invoices, and hire employees is directly tied to the KBLI codes listed on your NIB.

A common mistake is to only register a broad, general KBLI code. For instance, while the primary code for a digital marketing agency is 78100 (Advertising), a modern agency’s services often extend to web development, content creation, or IT consulting. This mismatch between your registered codes and actual business activities can lead to fines and even license suspension.

It’s also crucial to understand that not all KBLI codes can be combined. The Indonesian government explicitly prohibits pairing codes that represent conflicting business activities. A common example is the prohibition on combining wholesale trade and retail trade codes.

• KBLI 46100 (Wholesale Trade on a Fee or Contract Basis) is for businesses that sell to other businesses, not to the end consumer.
• KBLI 47111 (Retail Trade in Minimarkets/Supermarkets) is for businesses that sell directly to the public.

Similarly, some codes are designated as “stand-alone” and cannot be used with any others. If you overlook these rules, the OSS (Online Single Submission) system will reject your application and require you to restart the entire licensing process.

2. Overlooking Post-Registration Compliance Requirements

A common misconception is that once you register a PT PMA, the OSS system automatically manages or notifies you of compliance tasks. However, it only issues your NIB and acts as a submission portal– each government authority still enforces its own regulations independently. 

As a result, missed filings with one agency won’t trigger notifications from another, and unresolved issues can quietly accumulate until they jeopardise your company’s legal standing. Some key obligations include:

• Ministry of Investment (BKPM): Law No. 25 of 2007 mandates a Quarterly Investment Activity Report (LKPM) via OSS detailing capital utilisation and ongoing operations to maintain your business licence.
• Directorate General of Taxes (DGT): Monthly filings for withholding tax (PPh 21, 23, 4(2)) and VAT are mandatory even without revenue. You must submit the annual corporate tax return (SPT Tahunan PPh Badan) within four months of the fiscal year-end to keep your tax ID (NPWP) active and reduce frequent audits.
• Ministry of Law and Human Rights (MOLHR): Under Law No. 40 of 2007 on Limited Liability Companies, you must hold an AGM within six months of year-end, and record any changes to directors, capital, or company articles online to stay compliant.
• Relevant Local Government Agencies: GR No. 28 of 2025 requires applications for site zoning, environmental compliance, and building or occupancy permits through the OSS. Final approvals are issued by the National Land Agency (BPN), the Environmental Agency (DLH), and the Public Works and Spatial Planning Office (PUPR), respectively. You’ll have to secure these permits before starting construction or activating your NIB.

Indonesia’s compliance system essentially requires active coordination with multiple agencies. This is why it’s highly recommended for you to maintain a structured compliance calendar or partner with a local compliance team to handle reporting and submissions on your behalf.

3. Incorporating Your PT PMA Too Early

One of the most expensive mistakes foreign investors make is setting up their PT PMA too soon. Many rush into incorporation before validating market demand, finalizing their KBLI codes, or understanding what compliance will actually require. As a result, they’d end up locked in a corporate structure that’s costly and difficult to undo.

It’s important to recognize that company incorporation is resource-intensive. Once your company is registered, you’re legally required to maintain accounting records, file monthly and annual tax returns, and meet the minimum investment capital requirement (currently IDR 2.5 billion). This carries on even if the business is dormant or generating little to no revenue. 

Because of these ongoing costs, many foreign-owned businesses find themselves in financial strain early on. Some even dissolve within their first year when operating costs, compliance fees, and reporting requirements far outweigh their initial returns.

This is why if you’re still testing the market, it’s often more strategic to hold off incorporation until you’re ready to commit. At this stage, two solutions can help you establish a presence and validate your business model:

• An Employer of Record (EOR) acts as the legal employer of your local workforce. You can start hiring, manage payroll, and kickstart launch pilot operations to prove market demand and operational viability. 
• An Importer of Record (IOR) can become your licensed consignee. This allows you to import product samples or initial inventory, while having your customs, tax declarations, and import approvals handled on your behalf.

Emerhub’s support covers everything from selecting the right KBLI codes, to securing permits and handling the entire incorporation process. We also manage your post-registration compliance, ensuring your business remains fully compliant throughout your operations in Bali.

Regulatory Missteps that Stall Your Company Registration in Bali

4. Failing to Appoint a Resident Director Can Disrupt Your Operations

In Indonesia, a company cannot function without a legal representative on the ground. This is the role of a resident director who must possess a valid Indonesian tax ID (NPWP). 

You can legally incorporate a PT PMA with a non-resident director in the initial stage, but doing so will paralyze your operations after incorporation. Without a resident director, you cannot open a corporate bank account, file tax reports, or enter into key commercial agreements.

A common mistake is assuming that any director can hold the position. In reality, they must be either an Indonesian citizen or a foreigner with valid work permit (KITAS) and personal NPWP. This means that an Investor KITAS alone does not qualify someone for the role unless they have spent at least 183 days in Indonesia and obtained their NPWP.

To stay compliant and avoid operational delays, appoint your resident director immediately after incorporating your company. If they’re a foreigner, this should follow right after the issuance of their KITAS and NPWP.

5. Assuming You Must Give Up Control to a Local Partner

Many foreign investors mistakenly believe that appointing an Indonesian director automatically means you must surrender a portion of company control and ownership. This is not the case because, in Indonesia, ownership (shares) and directorship (management) are legally distinct. An Indonesian citizen can serve as both your resident director and shareholder, but these roles are not dependent on each other.

The Positive Investment List clearly outlines which business sectors (KBLI) are open to 100% foreign ownership. For most industries, such as technology, consulting, and various tourism sectors, you can maintain full control of your company.

However, in certain regulated sectors such as retail and real estate, the government mandates local ownership percentages (often between 30-51%) to protect domestic industries. In these cases, you will need to bring on a local shareholder, not necessarily a local director.

The key takeaway is that your ability to own 100% of your company is determined solely by your KBLI code. While you must comply with the Resident Director requirement, Indonesian corporate law does not mandate they own any equity. You need a local partner only when local shareholding is required for your specific activity, as per the Positive Investment List.

Emerhub experts can provide a breakdown of the ownership requirements for your specific business sector and help you structure your company with full compliance.

6. Registering a Company with Friends or Acquaintances without a Clear Agreement

It’s often common and very tempting to start a company with friends or acquaintances based on a verbal agreement or a “handshake deal.” While the initial trust may start strong and convincing, disagreements over finances, responsibilities, or equity can quickly escalate. This then leads to legal disputes and ultimately, the collapse of both the business and friendship.

A comprehensive Shareholder Agreement is the best way to prevent these conflicts. It serves as a legally binding blueprint for your partnership, formalizing critical details that a verbal agreement cannot cover. It should outline:

• Ownership Structure: Clearly defines each partner’s equity and investment.
• Profit and Loss Distribution: Establishes how profits are shared and how losses are handled.
• Decision-Making Authority: Specifies who has the final say on major business decisions.
• Dispute Resolution: Provides a clear, pre-agreed process for resolving conflicts.
• Exit Strategies: Outlines how a partner can sell their shares or exit the company without disrupting operations.

By formalizing your partnership from the start, you ensure a strong legal foundation that protects your investment, relationships, and most importantly, your peace of mind.

Set Up Your Bali Business with Ease

When the rules are layered with local regulations, zoning checks, and language barriers, the smallest mistakes can create costly setbacks. From misclassifying your KBLI code to missing a compliance filing or entering a poorly structured partnership, these missteps can delay operations for months and drain your resources.

This is where having experts on the ground makes a real difference. Our team in Bali will handle all the details for you and work directly with local authorities to ensure your business setup runs smoothly. Our services include:

• Business classification and licensing strategy
• Company incorporation and PT PMA setup
• Permit acquisition and local approvals
• Full relocation support
• Post-registration compliance

Need support to navigate your business setup in Bali? Reach out to our experts for a free consultation today!