Starting a business in Indonesia offers attractive opportunities for foreign investors. However, before commencing business activities, several legal, corporate, licensing, and administrative aspects need to be properly prepared and carefully planned.
For foreign investors, one of the common business structures is a Foreign Investment Company (PMA) established as a limited liability company in accordance with the nature of the intended business activities.
1. Determine the Business Activity and KBLI
The first step is to determine the appropriate business activity and Indonesian Standard Industrial Classification (KBLI) code. This is important because each business sector may have different requirements concerning foreign ownership, licensing, specific regulatory requirements, or partnerships with cooperatives and micro, small, and medium-sized enterprises (MSMEs).
The provisions concerning investment business sectors are, among others, regulated under Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021.
2. Establish the Legal Entity
If the business will be established as a PMA company, the incorporation of the company must comply with Indonesian law, including the preparation of the deed of establishment, approval of the legal entity, and arrangement of the company's shareholding and capital structure.
At this stage, proper legal structuring is essential to ensure that the company is aligned with its intended business activities and applicable investment regulations.
3. Obtain Business Licenses Through OSS
After determining the appropriate corporate structure, the business must fulfill the requirements for Risk-Based Business Licensing (Perizinan Berusaha Berbasis Risiko/PBBR) through the Online Single Submission (OSS) system.
The current primary legal basis for risk-based business licensing is Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing, which replaced Government Regulation No. 5 of 2021. The regulation covers basic requirements, Business Licensing, Supporting Business Licenses (PB UMKU), the OSS system, supervision, and sanctions.
The technical guidelines for business licensing through OSS are further regulated under Minister of Investment and Downstreaming/Head of BKPM Regulation No. 5 of 2025.
4. Pay Attention to Foreign Investment Requirements
Not every business sector is subject to the same rules regarding foreign ownership. Certain business activities may be fully open to foreign investment, while others may be subject to specific requirements or restrictions.
Therefore, reviewing the applicable KBLI classification and foreign investment regulations before establishing the company is crucial. Proper planning at this stage can help prevent the need to restructure the company or resolve licensing issues at a later stage.
5. Ensure Proper Legal and Administrative Compliance
In addition to company incorporation and business licensing, investors should also consider matters such as business agreements, taxation, employment regulations, property ownership or utilization, reporting obligations, and sector-specific licenses, where applicable.
Proper legal planning from the beginning can help ensure that the investment process is conducted in a legally compliant, secure, and well-structured manner.
Key Legal Framework
The main legal regulations include:
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Law No. 25 of 2007 on Investment, as amended, among others, by Law No. 6 of 2023 on the Enactment of the Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation into Law.
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Law No. 40 of 2007 on Limited Liability Companies, as amended.
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Presidential Regulation No. 10 of 2021 on Investment Business Fields, as amended by Presidential Regulation No. 49 of 2021.
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Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing.
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Minister of Investment and Downstreaming/Head of BKPM Regulation No. 5 of 2025 concerning guidelines and procedures for risk-based business licensing and investment facilities through the OSS system.