Bali’s nature as a lifestyle destination has seen it become home to a rapidly expanding community of entrepreneurs in Bali. There is a perception that it provides both the flexibility and freedom to achieve big dreams and big ideas. Many entrepreneurs, however, fall short of realizing their goals for 10 common reasons.
1. Get caught working without work and stay permit (KITAS)
This is by far the most common error made by start-ups and entrepreneurs in Bali. To work legally in Indonesia you require permission from the Ministry of Manpower. There is often confusion around the process required to obtain a work permit, due to complex rules. In recent years the process has become easier than it once was. Setting up a business without the right work and stay permit is one of the most common causes of failure for entrepreneurs in Bali. You can lose control of a business, be fined, or even get removed from the country.
2. Failing to have a business plan when registering a new company
The first question anyone setting up a company in Indonesia should ask themselves is: What will my business activities be? Many entrepreneurs come to Bali with a mass of ideas but without a refined business plan. Knowing your goals precisely should be a priority before you register your company. Changing licenses can be very expensive. In fact, it can often cost the same cost as registering a new company!
Your business activities are important because they determine your business classification (KBLI). Certain business classifications can be owned 100% by foreigners. Many of them however are in the negative investment list. These restrict or prohibit foreign ownership.
Some entrepreneurs also try to set up different activities under one company. In Bali, there are limitations on the business classifications that can be registered under one PT PMA. Add the consequence.
3. Running into legal troubles by using an unprofessional corporate registration agent
As in any field of business, it is important to be diligent about who you are conducting business with. Entrepreneurs in Bali that are new to the region are particularly vulnerable to agents. They may be offering their services that turn out to be incomplete, or deceitful. Find a service provider whose background you have checked and behavior you can trust.
Once you have chosen an agent, keep an eye on the progress. A common mistake is when an agent does not ask for power of attorney from the client. This opens the door to possible forgery.
If the agent forges your signature, it means that you have no control over what they could apply for. It happens more often than you would think.
It is possible to register a PT PMA without the help of an agent. However, unless you are incredibly well informed about sudden changes in regulations, mistakes will occur. This means your application will either be refused or delayed, both resulting in waste time and money.
With Emerhub your company will benefit from years of experience and corporate knowledge, assisting you to navigate the complexities of Indonesian law and regulations. Benefit from our knowledge of the market and our attentive customer-focused approach to service.
4. Endangering investments by leasing property without proper checks
Checking property documentation thoroughly can help you avoid leasing a property that does not meet the proper requirements. Hiring an agent to do so on your behalf can make this easy.
The building permit, or IMB, needs to be suitable for company registration. Without this, the property is pretty much useless to the investor for business purposes. Further expenditure would be required for the company or entrepreneur in Bali to process the appropriate IMB to proceed.
5. Running into obstacles by planning too far in advance
Indonesian law and regulations relating to business and the economy can change twice or more a year. It is of course important to have a good idea about the nature of your business and goals. It is also not necessarily practical to make a five-year plan that could be significantly impacted by economic changes.
Flexibility is important as well as taking note of the changing business conditions. Things change in Bali almost daily, and with them also the business opportunities for growth and expansion. This is due to its situation as a rapidly growing and evolving market.
6. Losing control of a business by making a risky nominee arrangement
Nominee arrangements made with friends or family can be one of the riskiest when entering the market. A secure solution is having a nominee agreement with a proper structure.
Instead of choosing an individual, you can use a company such as Emerhub to sign a nominee agreement with. After the agreement, your business can either use Emerhub or a trustworthy local corporate nominee to pledge the shares. This way you have documentation that is approved by Indonesian laws and can safely conduct business.
An agreement like this minimizes the risk of a nominee leaving with your assets. It also reduces the risk of the nominee being unable to manage the company without nominee support in the future. Using a nominee company instead of an individual eliminates risks such as death, divorce or marriage.
7. Entrepreneurs in Bali having overly rigid legal expectations
Some entrepreneurs entering the market unrealistically expect business conditions similar to their own country. It is for the same reason that Bali has become a hotspot for start-ups – its emerging market status – that legalities can sometimes take time.
Entrepreneurs establishing new businesses often want to see an exhaustive checklist of requirements. This is often not possible as the laws are subject to change here. Authorities have wide discretion to ask whatever requirements they want of businesses. To succeed in Bali requires a degree of flexibility and agility. Otherwise entrepreneurs here can struggle to take advantage of the opportunities available.
8. Run into enforcement issues by picking and choosing which laws to comply with
Processing the required permits costs money and takes time, which often entrepreneurs are not willing to invest in. This may be because they are not familiar with the procedures or they wish to start the business faster. Unfortunately, it’s illegal and not sustainable.
Keep an open mind – even if your experience is different, be tolerant and accepting of the laws you are facing. If some laws are confusing, this is no reason to disobey or bypass them. This is where you should ask help from an agent.
9. Losing money due to unrealistic timelines for incorporating a business in Indonesia
Doing business in Indonesia is getting easier every year. Yet, it is undeniable that navigating the changing requirements can take time.
For entrepreneurs used to timelines in established markets, it’s wise to prepare for different timeframes in Indonesia. The minimum times set out in law are a guide only. Holidays, religious ceremonies, and office closures can impact this. This is part of Bali’s life and needs to be respected and factored into your business planning.
10. Losing out on a big opportunity – by giving up before beginning!
Many entrepreneurs come to Bali with big plans. Just as many are quickly overwhelmed with the prospect of navigating complex rules and regulations. They often choose not to start a business at all as everything seems too complicated and expensive. However, this can be a competitive advantage. Competition in the market is not fierce because many people hesitate and decide not to proceed.
Entrepreneurs in Bali do best when they can see the surrounding limitations of the country as the sources of opportunity. This is what Indonesia is all about – exploring the incredible possibilities and coping with what may come along during the journey!