Can just one person establish a CV (Limited Partnership) in Indonesia?

In Indonesia’s business landscape, selecting the right business structure is a crucial step for success. One question that frequently arises is: “Can just one person establish a CV (Commanditaire Vennootschap or Limited Partnership)?” This article examines the legal requirements for establishing a CV in Indonesia.

Short Answer: No, a CV Cannot Be Established by One Person

According to Indonesian law, a CV cannot be established by a single person. A CV must be founded by a minimum of two individuals with different roles and responsibilities. This requirement is stipulated in the Indonesian Commercial Code (KUHD) articles 16-35 and represents a fundamental requirement that cannot be circumvented.

Why Does a CV Require at Least Two Founders?

The CV structure necessitates two distinct types of partners:

1. Active Partner (Complementary)
   • Bears full responsibility for company operations
   • Has legal liability extending to personal assets
   • Acts as the manager who runs the daily business activities of the CV
2. Silent Partner (Limited Partner)
   • Only contributes capital to the CV
   • Not involved in the operational management of the company
   • Liability is limited to the amount of invested capital

The presence of both types of partners is a fundamental characteristic of a CV that distinguishes it from sole proprietorships, making it legally impossible to establish a CV with just one person.

Legal Procedure for Establishing a CV

To establish a legally valid CV, the following steps must be taken:

1. Creation of Deed of Establishment by a Notary
   • Including the identities of at least two founders (active and silent partners)
   • The notary will verify compliance with the number of founders requirement before issuing the deed
2. Registration with Relevant Authorities
   • Arranging a Company Domicile Certificate (SKDP)
   • Registration for a Tax Identification Number (NPWP)
   • Registration with the District Court
   • Processing business licenses such as Trade Business License (SIUP) and Company Registration Certificate (TDP)

At each registration stage, submitted documents must demonstrate that the CV was established by at least two individuals in accordance with applicable regulations.

Alternative Business Entities for Sole Founders

If an entrepreneur plans to run a business without partners, there are more suitable business entity alternatives. One available option is an Individual Company (PT Perorangan), which one person can establish. This business entity provides protection through the separation of personal and company assets, albeit with a more complex establishment process.

Comparing CV with PT (Limited Liability Company)

As these two business entities are often the preferred choices for entrepreneurs, here are some important considerations when choosing between a CV and a PT:

1. Asset Seizure Risk for Active Partners
   • CV: Active partners face high risk due to unlimited liability. When a CV faces bankruptcy or legal claims, all personal assets of active partners may be seized to pay company obligations.
   • PT: Shareholders have limited liability up to their invested capital. Shareholders’ personal assets are protected from seizure due to company obligations.
2. Funding Opportunities
   • CV: Has limitations in securing external funding. Banks and financial institutions are generally less interested in providing large loans as the CV structure is considered less transparent and professional.
   • PT: Has broader funding opportunities, including access to bank credit, bond issuance, and potential for going public through an IPO (Initial Public Offering).
3. Legal Compliance
   • CV: Relatively simple reporting requirements. Not required to hold General Meetings of Shareholders (GMS) and financial statements need not be audited except for specific tax purposes.
   • PT: Required to prepare annual financial statements, hold GMS at least once a year, and for public PTs, financial statements must be audited by a public accountant. Legal compliance is stricter with administrative to criminal sanctions.
4. Other Factors to Consider
   • Taxation: Different taxation mechanisms apply to CVs and PTs. PTs are subject to corporate income tax and dividend tax for shareholders.
   • Business Continuity: PTs have more guaranteed business continuity as they don’t depend on specific individuals. CVs heavily rely on the active partner.
   • Business Reputation: PTs are generally viewed as more credible and professional by business partners, especially for international collaborations.
   • Establishment and Operational Costs: PT establishment and compliance costs are higher compared to CVs, including notary fees, licensing, and regular reporting.

Conclusion

A CV cannot be established by one person alone under Indonesian law. Establishing a CV requires a minimum of two founders consisting of an active partner and a silent partner. For individuals wishing to run a business on their own, a Sole-Proprietor PT offers a more suitable alternative.

Need Expert Assistance in Establishing a CV?

Establishing a Commanditaire Vennootschap (CV) in Indonesia involves various legal and administrative steps that require careful attention. To ensure a smooth registration process, trust Lexara ID, a business consulting firm that specializes in business formation, licensing, and legal compliance for entrepreneurs and foreign investors.

Contact us today at info@lexara.id to discuss your CV establishment needs and receive expert guidance tailored to your business objectives.