Perseroan Terbatas (PT): Overview and Types

What Is a Perseroan Terbatas (PT)?

Perseroan Terbatas (PT) is the type of legal entity that a foreign company, foreign government, or foreign individual must use to run a revenue-generating business in Indonesia. Also known as a foreign investment limited liability company, a PT is a business entity that allows foreign investors to conduct commercial activities in Indonesia.

Any Indonesian company that directly receives foreign investments must take the form of a PT. A PT may be classified as an open, closed, domestic, foreign, individual, or a general public PT.

Understanding a Perseroan Terbatas (PT)

Every country has different legal entity types. The American equivalent of a Perseroan Terbatas (PT) is a limited liability company (LLC). Most PTs operate similarly to limited liability companies (LLCs) and offer shares to the public. Shareholders of a PT are legally liable for a company's debts if it files for bankruptcy. However, investors are only liable only for the amount of their original investment. The articles of association of a PT outline share ownership.

Indonesian law governs the types of businesses that can operate as a PT. Governance and administration of PTs are handled on a regional basis and the rules may vary for each region of the country. The license requirements for each business will depend on the type of work in which they will be involved. While the United States has business entities that operate similarly to an Indonesian PT, the specific rules and guidelines for a PT adhere to Indonesian law regarding business entities. 

Countries often define their business in different terms and with various stipulations. Although a PT mirrors the limited liability company of the United States, there are fundamental differences attributed to the governing laws.

Types of Perseroan Terbatas (PTs) in Indonesia

There are a few basic types of PTs.

Open PT

An open PT is an LLC that offers shares to the public. Typically, this type of LLC offers ownership shares available for purchase by most investors. Thus, buying and selling stocks is relatively straightforward.

Closed PT

A closed PT is an LLC that offers only private shares and restricts the sale of those shares to specific individuals or groups. This limitation is most common for family-owned and operated companies.

Domestic PT

A domestic PT is an LLC that physically exists and offers its goods or services in Indonesia. These types of PTs must strictly comply with rules governing businesses in the Republic of Indonesia.

Individual PT

An individual PT is an LLC with shares issued to and owned by only one person. This person, typically the owner or director of the company, has sole authority within this type of business structure.

Foreign PT

A foreign PT is an LLC that is incorporated in, and subject to, the laws of a foreign country. When an external company establishes a PT in Indonesia, the business is also subject to the laws and regulations of Indonesia.

General Public PT

A general public PT is an LLC that has a free-share type ownership system. Any entity may own shares of this type of company. The structure is similar to an open PT. However, shares of this type of company can also be listed on the stock exchange.

Requirements for Perseroan Terbatas (PTs)

The Indonesian Investment Coordinating Board (BKPM) is a Non-Ministerial Government Agency, that acts as a go-between for the government and private businesses. The BKPM is in charge of implementing policy and coordinating foreign direct investment in accordance with the country's regulatory provisions. The BKPM is mandated to help increase quality domestic and foreign direct investment to help drive the Indonesian economy and promote job growth.

Below are some of the steps required to establish a PT and the length of time it may take to complete each step:

• Obtain a principle license & business license — seven days
• Deed of Establishment (containing the Articles of Association), which needs to be legalized by a public notary, which is filed with BKPM— one to two days
• Legalization of the legal entity status of the PT PMA must be filed with the Ministry of Law and Human Rights (MOLHR) — 10 days
• Domicile Letter is needed from the local district authority — three days
• A tax identification number (NPWP) and taxable entrepreneur registration number (PKP) from the local tax office may need to be obtained — three days
• Company Registration Certificate (TDP) from the agency for integrated licensing services (BPPT) —14 days
• Manpower Report and Company Welfare Report from the sub-department of the Ministry of Manpower — seven days

Special Considerations

Foreigners interested in starting or investing in an Indonesian business will need to navigate the country's complex rules regarding foreign investment. While a PT is a legal form for foreigners to engage in business, setting up a foreign investment company in Indonesia can require a significant amount of time and expertise to comply with government regulations and receive final approval.

Not all sectors are open to foreign investment in Indonesia. Some sectors require partial domestic ownership, which means the foreign investor will need to work with a local partner if they want to form a PT.

In some cases, establishing a representative office might be a better option for a foreign investment company looking to do business in Indonesia. This allows the company to explore business opportunities through local networking and market research. After performing such due diligence, the company will be better informed before taking the next step of forming a Perseroan Terbatas.