Legal Tips for Starting Business

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Legal Tips for Starting Business

Business or entrepreneurship is a promising option for particular people. Aside from its time flexibility, independent money management ability, and chances for competing productively along with opening opportunities for employment. However, some people become entrepreneurs due to demands of conditions, as experienced by some people in this pandemic situation. A business must fulfill the prevail regulations, despite of various backgrounds in starting a business.

Apart from understanding forms of business entity with a legal form, such as Limited Liability Companies, Foundations and Cooperatives, or business entity without a legal form, such as Individual Business, Trading Business, CV, and Firm, other aspects that has to be noticed is to define the business criteria. Business criteria is divided into Micro, Small, Medium and Big Enterprises, which each of them has defines and criterias as following matters:

  1. Micro Enterprises

Micro Enterprise is a productive enterprise belong to individual and/or individual business entity that meet the criterias, which are:

  • Own a net worth in maximum of Rp50.000.000,- (fifty million rupiahs) not including land and the building where business takes place; or
  • Have annual sales in maximum of Rp300.000.000,- (three hundred million rupiahs).
  1. Small Enterprises

Small enterprise is a productive economic business which is conducted individually or business entity, that is not a subsidiary company or branch company which owned, managed, or a part of Medium or Big Enterprises directly or indirectly, with criterias as follows:

  • Have a net worth more than Rp50.000.000,- (fifty million rupiahs) not including land and the building where business takes place; or
  • Have annual sales more than Rp300.000.000,- (three hundred million rupiahs) to maximum of Rp2.500.000.000,- (two billion five hundred million rupiahs).
  1. Medium Enterprises

Medium enterprise is a productive economic business which is conducted individually or business entities which is not a subsidiary company or branch company that is owned, managed, or a part of Small or Big Enterprises directly or indirectly, which have criterias:

  • Have a net worth more than Rp500.000.000,- (five hundred million rupiahs) to the maximum of Rp10.000.000.000,- (ten billion rupiahs) not including the land and building installation; or
  • Have annual sales more than Rp2.500.000.000,- (two billion five hundred million rupiahs) to maximum of Rp50.000.000.000,- (fifty billion rupiahs).
  1. Big Enterprises

Big enterprise is a productive economic business which is conducted by a business entity with a net worth or annual sales more than the medium enterprises, which include national state owned business or private business, joint ventures, and foreign business which conduct economic activities in Indonesia.

 

Following to the understanding of business criterias, it is also essential to discover what business entities that will be conducted. It is necessary to know about Indonesia Standard Business Field Classification code (“SBFCC”) to register for business permission. According to Government Regulation Number 24 of 2018, every business entities need to register itself and obtain Business Indentification Number (“BIN”) through Online Single Submission institution. The BIN will be followed up with the business’ permission, commercial, or operational depending on the business sector.

Despite of the explanation above, if you would establish a joint venture with other people, it is necessary to create a business founders agreement. In the agreement may be negotiated the need of capital, rights and obligations of business founders, preventive and repressives efforts which caused by damages, evaluation and supervision by each founders, and other matters related to the business which will be conducted. It is important to mitigate the risk of disputes between founders in the future. For example, coffee shop business which built by A as a coffee maker, and B who does the marketing. Between A and B need to make an preliminary agreement to the business plan which will be conducted, including the business consequences that may appear. A and B need to agreed concerning in what point that they will develop their business in the future, or in whose name that they will register the trademark of their coffee shop, or the cost of workers’ salaries or the authority to make decisions regarding the business. If it is not regulated in the business founders’ agreement, therefore A and B may be in dissent about how to perform the business based on each perspectives.

Business founders agreement shall be a foundation in the future, if the founders agreed to upgrade the status of their business entity which previously is not in a legal form to a limited liability company with a legal form. Several matters which agreed in a business founders agreement may be adopted to Articles of Association of the limited liability company that will be established as long as are not conflicted with Company Law.

Despite of the legal suggestions above, there are still many other matters that may be need to be noticed in entrepreneurship, such as manpower matters, tax, intellectual property right, agreements with third party, or bank financial conditions. However, the following matters will be casuistic depending on each conditions and business entities related. The most important part of establishing a business is must be based on economic study and business plan, since the purpose of people doing business is to obtain profits, nevertheless the purpose is should be in line with the prevail regulations to avoid risk potential to the business plan.

 

This Article is generally made for the purpose of ANR Law Firm publication only and should not be treated as legal advice for your legal problem. Shall you have any further questions regarding this topic, you may contact the Advocate who authored this article at anrlawfirm@anr-lawfirm.com.

Author: Leonardus Agatha P., S.H., M.H.

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