Business Entities in Indonesia

A business entity is an organization created by one or more natural persons to carry on a trade
or business. In Indonesia, the classification of business entities is grouped according to their
capital ownerships. There are 3 kinds of business entity, such as:

A. Badan Usaha Milik Negara (BUMN) / State Owned Business

According to the Constitution of Indonesia Article 19 Year 2003, BUMN is a
legal entity that is created by the government in order to partake in commercial activities
on the government's behalf. It can be either wholly or partially owned by a government
and is typically earmarked to participate in specific commercial activities. BUMN has
an important role in the society as a producer of things and services, providing job
vacancy to the government for source of state revenue. Since 2001, management of
BUMN is coordinated by the Minister of BUMN.
Currently, Indonesia has 137 BUMN as listed in www.bumn.go.id . Those 137
BUMN is grouped again into 13 sector, such as :
a. Agriculture, forestry, fisheries
b. Mining and Excavation
c. Processing Industry
d. Procurement of electricity, gas, steam / hot water, and cold air
e. Waste management and recycling
f. Construction
g. Large and retail trade
h. Transportation and warehousing
i. Provision of food and drink
j. Information and communication
k. Financial services and insurance
l. Real estate
m. Professional services
BUMN has important roles in the economic of Indonesia, as follows :
1. Contributing in national economy
2. Earn profit
 3. Organizing public benefits in the form of the provision of high quality and adequate
goods and / or services for the fulfillment of the lives of many people
4. Become a pioneer of business activities that cannot be implemented by the private
sector and cooperatives;
5. Actively providing guidance and assistance to entrepreneurs in the weak economy,
cooperatives and the community
6. Implement local government policies in the fields of economics and development
7. Fertilization of funds for development financing
8. Encourage community participation in the business field
9. Meet goods and services for the benefit of the community
10. Become a pioneer in activities that are not in demand by the community

In general, BUMN in Indonesia is classified into three form :

a. Persero
Persero is a business entity whose capital is divided into shares which all or at least 51%
of the shares are owned by the government whose main objective is to gain profits. In
some Persero, government has made some basic changes to make the stock can be owned
by public.
Example : PT Telekomunikasi Indonesia
Characteristic of Persero is :
- The highest power is held in General Meeting of Stakeholders.
- Its main purpose is to gain profit.
- It is led by the director under the surveillance of commissioner.
- The capital is divided into stocks which half of the stock is owned by the government.

b. Public Company / Perusahaan Umum

Perum is a BUMN whose capital is owned by the state and isn’t divided into
shares. The purpose of Perum is to provide high quality things and services and to gain
high profit according to the principle of management company.
Example : Perum Peruri and Perum Perumnas.
Characteristic :
- Its purpose is to serve the public interest.
- Law-based entities and under the principle of Constitution.
 - Generally, work in vital services.
- All of the capital is owned by the government, separated from the wealth of the
country.

c. Perjan
Perjan is a BUMN whose capital is a part of the state budget that becomes rights
from the relevant department. The purpose of Perjan is to serve the society aimed at the
commonweal without ignoring the terms of efficiency, efectivity, and economic.
According to the Constitution No. 9 Year 1969, the characteristic of Perjan is :
- Its main purpose is to serve the public interest.
- Under the part of department.
- Owned by the government.
- The employee status is civil servant
- The capital comes from annual state income and expenditure budget

d. Regional Owned Enterprises / Badan Usaha Milik Daerah(BUMD)

BUMD is a company that was built and owned by the regional government. The
authority for the regional government to form and manage a BUMD is listed in
Government Regulation (Peraturan Pemerintah) No. 25 Year 2000 about The authority of
government and provinces as an autonomous religion.
Example : Bank Pembangunan Daerah (BPD), Perusahaan daerah Air Minum (PDAM),
Perusahaan Daerah Angkutan Kota (Bus kota)

B. Badan Usaha Milik Swasta/Private Business Entitiy

Is a business entity whose ownership is owned by the domestic citizen. According
to the Consitution Article 33, business entity that was given to the private sector is to
manage economic resources that is not vital and and strategic or not dominate the society.
The role of BUMS in economic of Indonesia is :
1. Increase foreign exchange receipts from private companies that do export and import
2. Increasing job vacancy to overcome unemployment
3. Assisting the government in increasing state revenues through various taxes
4. Assisting the government in pursuing production activities in order to increase the
prosperity of the society.
There are several kind of Private Business Entitiy, such as :
a. Sole Proprietorship/Perusahaan Perorangan
Sole Proprietorship is a business entity that was built and owned by an individual,
as well as the capital and responsible for every job to gain profit. Most people who start
a small business on their own, choose the sole proprietorship model because it’s the
simplest type of business organization, in terms of legal issues and taxation. There is only
one owner in a sole proprietorship. All the business assets and profits belong to the sole
proprietor. However, there is limited financial safety, because the owner is personally
responsible for all financial liabilities. The income and expenses related to the business
are filed under the owner’s personal tax return.

Advantages of a Sole Proprietorship :

 A sole proprietor has complete control and decision-making power over the business.
 Sale or transfer can take place at the discretion of the sole proprietor.
 No corporate tax payments
 Minimal legal costs to forming a sole proprietorship
 Few formal business requirements

Disadvantages of a Sole Proprietorship :

 The sole proprietor of the business can be held personally liable for the debts and
obligations of the business. Additionally, this risk extends to any liabilities incurred
as a result of acts committed by employees of the company.
 All responsibilities and business decisions fall on the shoulders of the sole proprietor.
 Investors won't usually invest in sole proprietorships.

b. Firm / Badan Usaha Firma

Firm is an alliance of two people or more to build and run a company under the shared
name and each member has the same responsibility to the company.
The advantage of Firm :
- The need of capital is easily fulfilled.
- The management of the company can be divided depends on the expertise of the
alliance.
- Every risk is carried together, thus it doesn’t feel too diificult.
 - The decision is carefully thought because the expert is the one who make it.

The disadvantage of Firm :

- The possibility of conflict among the owner.

- The decision taken are not fast enough.
- The action of one member could impact the whole member of the company.

c. Limited Parternship / Badan Usaha Persekutuan Komanditer (CV)

CV is an alliance of two people or more to build a company where a few people
role is to invest in capital and the other alliance is to run the company. Thus, in the
alliance of CV there are two alliance : active alliance and passive alliance.

Advantage of Limited Partnership :

• CV are well known to the public, making it easier for companies to participate in
various activities.
• CV easily earns capital because banks trust it.
• It is easier to develop because of the expert and trusted person.
• CV is more flexible
• The distribution of profits is given to the Commanders and not subject to income tax

Disadvantage of Limited partenrship :

• To establish a CV is more complicated, because it has to go through a notary deed
and registered with the Department of Justice.
• The legal status of CV is rarely chosen by the owners of capital or some large
projects.

d. Limited Liability Company(LLC) /Perseroan terbatas (PT)

Limited liability company is an alliance who earn capital by releasing stock,
where everyone can owned one or more stock and responsible for the capital submitted.
To build a PT, it has to be permitted by the notary and minister and should be announced
in Berita Negara. That means, Limited Liability Company is a law-based business
entity.
The advantage of LLC :
 - The needs of capital is easily fulfilled.
- The continuity of the company is more guaranteed.
- Efficient in the management of leadership.

The Disadvantage of LLC :

- The cost it takes to keep the company alive.

- Leading a LLC is harder than any other business organization.

C. Cooperative/Koperasi

Cooperative (also known as co-operative, co-op, or coop) is "an autonomous

association of persons united voluntarily to meet their common economic, social, and
cultural needs and aspirations through a jointly-owned and democratically-controlled
enterprise". According to PP No. 60 Year 1959 it is stated that the form of cooperatives is
the levels of cooperatives that are based on the way they are centralized and merged. From
that provision, there are 3 kind of cooperative, such as :
a) Primer
This cooperative needs at least 20 member. There are a primer cooperative in every
village such as : employee cooperative(Koperasi karyawan, Civil servant
cooperative (Koperasi pegawai negeri) and KUD
b) Central
A cooperative which consists of at least 5 primary cooperatives in each level 2 region
where a cooperative center is grown
c) Combined
A cooperative which consists of at least 3 primary coopertive in every level 1 region

Cooperative has an important role in the national economic, such as :

1. Build and develop the potential and economic capabilities of members in particular and
the community in general to improve their economic and social welfare.
2. Play an active role in efforts to improve human life and society
3. Improving the people's economy as a basis for the strength and resilience of the national
economy
4. Create and develop a national economy which is a joint effort based on the principle of
kinship and economic democracy
The pros of cooperative is :
• The remaining business results generated by the cooperative will be shared with
members.
• Members of cooperatives play a role as consumers and producers at once.
• Someone who will become a member of a cooperative or who wants or who has become
a member, not because of forced, but his own desire to improve his life.
• Prioritize the interests of Members

The Cons of Cooperative is :

• Weak competitiveness.
• Not all members have cooperative awareness.

REFERENCES
https://archive.nytimes.com/www.nytimes.com/allbusiness/AB4113314_primary.html?mcub
z=0
https://bizfluent.com/about-5375993-kinds-business-organizations.html