Many think that the business structure would only matter when you register company in Indonesia. What many don’t realize is that the business structure will affect how you do business, your liability, and your periodic regulatory compliance. This article outlines the top reasons why choosing the right business structure in Indonesia is important for achieving your purpose and goals.
Asset Protection and Liability
The most common business structures are sole proprietorship, partnership and corporation. Each business structure will provide different asset protection to its owners. In particular, a sole proprietorship and general partnership provide very weak asset protection.
What this means is that if the business is in debt and the company’s properties cannot pay for it, the creditors are entitled to demand payment from the owners’ separate properties. In contrast, a corporation provides the owners the legal right to protect their personal properties in case this happens.
A partnership is created upon the agreement of the partners to set up a business to share in profits and resources. A partnership still exists even if they fail to register, only that the government does not recognize them. On the other hand, a corporation will not exist without a legal authority.
These differences will provide a glimpse into the identity of a business created on either structure. Because a corporation is created under the operation of law, the corporation is separate from its businesses. What this means is that the properties, liabilities and dealings of the corporation are the company’s alone and not of the owners. As such, a corporation is a fictitious entity that has its own identity.
This is important especially when companies are under a legal inquiry. Because corporations have a separate identity, the owners cannot be sued on the actions of the business. Partnerships, on the other hand, have no such power. Therefore, proceedings against the entity is an action against its owners.
Incorporate a Company in Indonesia
The company’s business structure is truly an important decision to make before registering. This choice will depend upon your capacity and vision. However, if you want the maximum protection as a business owner, to incorporate company in Indonesia is your ideal choice. Although it takes more time and effort to process, it provides the most legal support to your company.
Start your business today with 3E Accounting Indonesia. We provide consultancy and company incorporation services that ensures complete and professional processing of your business. Contact us today to avail our expert services.