Business Entities: Definition, Types and Forms of Business Entities in Indonesia

Definition, Types and Forms of Business Entities in Indonesia – A business entity is an organizational and economic unit that has the aim of obtaining profits or profits and providing services to the community. There are various types of business entities in Indonesia.

For those who don’t know what a business entity is, they often equate a business entity with a company, even though the reality is very different. The main difference is that a business entity is an institution, while a company is a place where the business entity manages various factors of production. The following is a more complete explanation of the definition and types of business entities in Indonesia, Sinaumed’s:

A. Definition of Business Entity

A Business Entity is a juridical (legal) and economic entity that uses capital and labor to seek profit. There are several things needed to set up a business entity, including products and services that will be sold or traded, how to market the products or services that will be traded,

Determination of the cost price and selling price of products or services, the need for labor, internal organization, spending, and the type of business entity to be selected. Examples of the most familiar bodies encountered include:

1. PT Kimia Farma Tbk

It turns out that this pharmacy, which has many branches, belongs to the state. PT Kimia Farma Tbk. is one of the oldest pharmaceutical companies in Indonesia, founded in 1817. Now Kimia Farma has produced many products that help people’s daily lives, ranging from medicines, multivitamins, and cosmetics.

2. PT Kereta Api Indonesia

PT Kereta Api Indonesia is a BUMN that provides rail transportation services. PT KAI’s services include passenger and goods transportation services. Founded on September 28, 1945, PT KAI continues to develop its performance in providing safe and inexpensive transportation for the community.

3. PT Indofood Sukses Makmur Tbk

If the above is a BUMN, then the following is a company with private ownership. Indofood was first established in 1968 with the initial name Lima Satu Sankyu. PT indofood is the originator of the legendary instant food from Indonesia which is also well-known abroad, namely Indomie.

For Sinaumed’s who want to set up a business such as PT, CV, Firma, Foundations, Cooperatives, and consulting companies, there is a Practical Guide to Establishing Various Business Entities that can help you to better understand issues of licensing, employment, and many more.

B. Types of Business Entities

Apart from form, business entities are also grouped by type. The following are the types in question:

1. Kinds of Business Entities Based on Their Activities

Business activities can vary. Below is a business based on the type of activity:

  • Extractive is the activity of taking what has been produced by natural resources. For example: forest products, marine products, and others
  • Agrarian , namely carrying out types of activities related to agriculture;
  • Trade is the activity of buying and reselling an item without changing its form. Example: rice trade is carried out by someone by buying rice in a rice-producing area,
  • Industry is the activity of processing raw materials and auxiliary materials into semi-finished goods or ready-to-use goods. For example: shoes, clothes, and so on
  • Services are activities that provide services and facilities in order to meet needs. Example: freight forwarding services, banking services, and others.

With the various types of business entities that exist, especially in Indonesia, there are also differences between the styles and characteristics of each of these business entities. Learn the various types of businesses in a practical and complete way through the Super Complete Guide to Establishing Pt, Cv & Other Business Entities.

2. Types of Business Entities Based on Capital Ownership

Capital plays a big role in the establishment of a business. Without sufficient capital, a business will not run optimally. The capital of a business also varies depending on who the owner is.

  • State Owned Enterprises (BUMN) , where the capital owner is the government or the state
  • Private Owned Enterprises (BUMS) , namely company capital owned by private parties. In this case, it can be in the form of national private companies and foreign parties
  • Regional Owned Enterprises (BUMD) , namely the ownership of the business is in the hands of the local government;
  • Mixed Business Entity , which is a business whose capital is owned by the government and the private sector.

3. Types of Business Entities Based on Country Region

Economic globalization has caused many businesses to be established abroad or foreign businesses to be established within the country.

  • Domestic Investment , where the company’s capital ownership is in the hands of the people of their own country.
  • Foreign Investment , is a foreign-owned company operating in Indonesia or within the country.

C. Forms of Business Entities in Indonesia

There are many types of business entities that we often encounter, such as PT, CV, or Perum. Below are the forms of business entities in Indonesia , including:

1. Cooperative

Cooperative is a business entity based on the principles of kinship. This economic organization is operated for the common good. Cooperative is a business entity (economic organization) owned and operated by its members to fulfill common interests in the economic field.

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There are also those who say the notion of a cooperative is a legal entity formed on the principle of kinship where the goal is for the welfare of its members. In this case, cooperatives are formed where their activities are based on the principles of the people’s economic movement.

Cooperatives can be established as individuals or cooperative legal entities. This business entity collects funds from its members as capital in running a business according to shared aspirations and needs in the economic field. Based on Law no. 25 of 1922 concerning cooperatives explained that cooperatives are open, democratic and independent. Cooperatives have common characteristics, including:

  • The owner can be an individual or a cooperative legal entity
  • Cooperative authorities and policies are determined through member meetings
  • The highest power in cooperative life is the meeting of members
  • The management is responsible for the management of the cooperative
  • Members are responsible for all obligations and risks that occur
  • There are organizational tools
  • It is an economic institution
  • Act as the backbone of the country’s economy
  • Act as a dynamist of the economy of society and the state
  • Serves to provide services to members and the community
  • Serves to improve human resources in society
  • Functioning as a government partner in achieving development goals
  • Cooperative capital consists of own capital and loan capital.

The function of the cooperative itself includes building and increasing the economic potential of its members and society in general, so that social welfare can be realized. Cooperatives have an active role in improving the quality of life of their members and the community.

Serves to Strengthen the people’s economy as the basis for the strength and resilience of the national economy where cooperatives are the foundation. Function Realizing and developing a better national economy through joint ventures based on the principle of kinship and economic democracy.

2. BUMN (State Owned Enterprises)

a. Perjan (Company Office)

Perjan is a BUMN whose budget is included in the State Budget (APBN). Perjan has a goal of making the community prosperous through dedication and service. This is done without neglecting the essential points, effectiveness, economy and good service. Currently BUMN does not have a contract. There is no business entity that can be classified as a contract because previously business entities have been transferred to become legal entities or business entities. Here are examples of perjan that have changed shape:

  • Perjan Kereta Api to become Persero Kereta Api.
  • Perjan Pegadaian, which was once a public company, has now changed its form again to become a limited liability company.
  • The work of the Children’s and Maternity Hospital is our hope, the work of Dr. Cipto Mangunkusumo, Dr. Hospital. Kariadi, Perjan Hospital Dr. M. Djamil, and Dr. Perjan Hospital. Mohammad Hoesin changed his status to a Public Service Agency.
  • Perjan Radio Republik Indonesia and Perjan Televisi Republik Indonesia became Public Broadcasting Institutions.

b. Persero (Company Company)

A state-owned company that has the form of a limited liability company. The company aims to pursue profits by owning shares wholly or partially (with a minimum of 51%) with ownership in the name of the Republic of Indonesia. In establishing a Persero, the Minister proposes such an undertaking to the President, complete with studies that have been based on various considerations. The company’s establishment aims to provide goods or services that have more selling value but still have good quality. Generally, the Persero is engaged in production, and aims to make a profit. Examples of PT Telkom, PT Bank Mandiri, and PT Pos Indonesia. The characteristics of the Persero include the following:

  • Civil law entity in the form of PT
  • Business relations are regulated under civil law
  • Led by a director
  • The government acts as a shareholder
  • Part or all of the capital is separated state property
  • Aimed at cultivating profits
  • Does not have state facilities
  • The employee is an employee of a private company.

c. Perum (Public Company)

Perum is a company that is wholly owned by the state. Perum has a goal of benefiting in general terms, both in the form of services and goods. General company activities must also pay attention to quality and profits with the principle of company management.

In forming a Perum, coordination is needed between the Minister of BUMN, the Minister of Finance and the president. The Minister of SOEs proposes to the President on the basis that has been reviewed with the Technical Minister and the Minister of Finance. Perum functions as a business organizer for the benefit of the public with quality goods and or services but prices remain affordable to the general public. This is still processed by a good company system. Example: Pawnshop, Shipping Corporation, and others. The characteristics of a Public Company are as follows:

  • Incorporated
  • Business relations are regulated under civil law
  • All capital belongs to the government from separated wealth
  • Engaged in the field of vital services
  • Aims to serve the public interest
  • Allowed to cultivate profits
  • Led by a director
  • The employee has the status of an employee of a state company
  • Has its own name, wealth, and freedom
  • The annual report is submitted to the government.

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3. BUMS (Private Owned Enterprises)

As the name suggests, BUMS is a business entity whose capital is owned by the private sector. BUMS was established with the aim of seeking profits in developing the business. BUMS has two types, among others, domestic private business entities and foreign private business entities.

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Domestic private business entity is a business entity whose capital is owned by the domestic community. Meanwhile, foreign private business entities are private business entities whose capital is owned by people who are not Indonesian citizens.

Article 33 of the 1945 Constitution regulates sectors that can be managed by the private sector, such as managing non-vital and strategic economic resources, or those that do not affect the lives of many people. The following are the types of BUMS which can be distinguished by several forms of business entity:

1. Commanditaire Vennootschap (CV)

CV is a form of partnership formed by two or more people with some members having unlimited responsibility and some others having limited responsibility. CV is divided into two types, namely active partners (complementary) and passive partners (limited).

Active partners are partners who manage a company and also have the right to enter into agreements with third parties. Meanwhile, passive partners are partners who only provide capital but do not interfere in the management of the company. It can be said that passive partners only play a role in providing capital.

Advantages Capital CV is bigger than a firm, Capital requirements are easily met, Company management can be divided, Risks are shared, Decisions are taken together, Able to seek credit from banks Disadvantages Occurrence of disputes, Decisions cannot be taken quickly, If one member resigns or dies, the company disbands, other members will be dragged down when a member acts outside the provisions.

2. Sole Proprietorship (PO)

PO is a form of business owned by one person. POs generally have small capital, limited types of products and production quantities, few workers, relatively simple production equipment and technology. An individual company is a business entity or company that is owned, managed and led by an individual. So that the responsibility for the company’s activities and risks is borne by the individual.


  • Easy to manage
  • Free to move
  • Only the owner has the right to obtain business profits
  • Low tax
  • Company secrets known only to the owner
  • Low organizational costs
  • Decisions are taken quickly and leaders are more motivated if the profits are large.

While the drawbacks are:

  • Leadership responsibilities are unlimited
  • Limited capital
  • Not guaranteed the survival of the company
  • Limited leadership skills
  • Losses are borne alone.

b. Firma (Fa)

Firma is an association between a person and another person (or more) to run a joint business with the aim of sharing the profits derived from the partnership.

It can be concluded that the Firm has at least two members. These members will be responsible for the company and submit capital according to what is stated in the deed of establishment of the firm.

If bankrupt, all members are responsible until the capital is also insured.

Excess :

  • Capital requirements are easily met
  • Management of the company can be divided, shared risk
  • Decisions are taken together
  • Able to seek credit from the bank

Lack :

  • Disputes occur, The distribution of profits and losses is regulated in the agreement, Decisions cannot be taken quickly, If one member resigns or dies, the company disbands, Other members will be dragged down when a member acts outside the provisions

c. Limited Liability Company (PT)

PT is a type of business that is protected by law with capital consisting of shares. A person can be said to be the owner of a PT if he owns as much shares as he has invested.

According to Law No. 40 of 2007 which regulates PTs, it is stated that a limited liability company is a business entity in the form of a legal entity established based on an agreement and conducting business activities with authorized capital which has been entirely divided into shares, or it can also be referred to as a partnership. capital.

In running a PT, owners of share capital can sell to other parties. This explains that it is very possible to own a company without dissolving or re-establishing it. Because the establishment of a PT is based on an agreement, it requires a minimum of 2 people to create a PT. The notary must know the agreement in making PT and make a deed to get approval from the Minister of Law and Human Rights. The characteristics of a Limited Liability Company are as follows:

  • It is a legal entity because it was established with a notarial deed, permission from the minister of law and human rights, announced in the state news
  • It consists of three types of capital, namely statute capital, issued capital, and paid-up capital
  • There are three types of bodies that determine the survival of the company, namely the GMS, the board of commissioners and the board of directors.

The advantages are limited liability, capital requirements are easily met, business continuity is guaranteed, trusted by third parties in terms of credit, efficient leadership, the fate of workers and employees is considered. Disadvantages Lack of concern from the Persero to the PT, The amount of costs in the PT and There are difficulties leading the PT.

d. Joint Ventures

A joint venture is a collaboration of several companies from various countries to become one company to achieve a concentration of economic power. The joint venture must have a legal entity PT or Limited Liability Company in the Industrial sector. The joint venture is led by a Board of Directors who are elected by the shareholders.

Thus the info, hopefully useful, Sinaumed’s!

Also read the following article related to “Form of Business Entity in Indonesia” :

  • Types of Sole Proprietorship
  • Definition of Goods Market
  • Definition of Request and Offer
  • Definition of Money
  • Definition of Inflation
  • Definition of Banks
  • Economic Principles
  • Definition of Scarcity
  • Definition of Macroeconomics
  • Microeconomics
  • Economic Recession
  • Economic growth
  • Economic Globalization
  • People’s Economy
  • Economic agents
  • Economic Problems in Indonesia
  • Economics
  • Types of Economic Systems
  • People’s Economy

Source: from various sources
Author : Atap
Editor : Ahmad