Sole Proprietorship in Indonesia

A sole proprietorship, known as “usaha perorangan” in Indonesian, is a straightforward and commonly chosen business structure in Indonesia where a single individual owns and operates the enterprise.

 

Ownership and Control

The business and the owner are not legally distinct entities in a sole proprietorship. As a result, the owner has complete control over all aspects of the business, including decision-making, operations, and profits. This simplicity allows for quick and independent decision-making.

Consequently, the owner bears unlimited personal liability for the business’s debts and obligations. This means that personal assets may be at risk if the business faces legal or financial issues.

Registration and Taxation

Registering a sole proprietorship in Indonesia is relatively uncomplicated. There is typically no formal registration requirement, and owners can operate under their own name or choose a trade name. From a tax perspective, the owner reports business income and expenses on their personal tax return, simplifying tax compliance.

Profit and Loss

Owners of sole proprietorships retain all the profits generated by the business but also absorb all losses. This direct financial connection between the owner and the business offers transparency and exposes the owner to financial risks.

Can Foreigners Open a Sole Proprietorship in Indonesia?

Interestingly, foreign residents can establish sole proprietorships in Indonesia. Residing abroad necessitates appointing an authorised representative, at least 21 years old, residing locally. The help of a registered filing agent is required to submit applications. For those residing in Indonesia, they need permission from the Indonesian authorities before registration.