Commanditaire Vennootschap (CV) is a popular business structure in Indonesia, especially for entrepreneurs starting small to medium-scale businesses. This format offers faster establishment, simpler administrative requirements, and lower costs compared to a Perseroan Terbatas (PT), which is equivalent to a Limited Liability Company.
However, choosing a business structure isn’t just about ease of establishment; it’s a strategic decision that affects future business development. A CV offers efficiency for limited-scale businesses but comes with significant personal liability consequences for its owners.
Differences Between CV and PT
Here’s a fundamental comparison between CV and PT to help with decision-making:
| Aspect | CV (Limited Partnership) | PT (Limited Liability Company) |
|---|---|---|
| Legal Status | Not a separate legal entity | Separate legal entity |
| Owner Liability | Active partners: unlimited liability extending to personal assets | Limited to invested capital |
| Attracting Investment | Limited. Cannot issue shares. | Can issue shares |
| Business Credibility | Less trusted for large projects | More trusted for large-scale projects |
| Taxation | Levied on active partners | Separate tax obligations |
| Financial Reporting | No mandatory public disclosure | Required to prepare and report |
A CV is ideal for small to medium businesses with controlled operational risks, while businesses with aggressive expansion plans or high risks should consider establishing a PT from the beginning.
Basic Concepts, Ownership, & CV Structure
A CV must be established by at least two parties with different roles:
Active Partner (Complementary)
- Main operational manager and decision-maker
- Unlimited liability extending to personal assets
- Subject to litigation in cases against the CV
Passive Partner (Limited Partner)
- A capital provider without operational involvement
- Liability is limited to the amount of capital invested
- No decision-making authority
A CV cannot own assets like land, buildings, or vehicles in its name. All assets must be registered under the active partner’s name, not under the CV’s name. This makes asset management more complicated, especially as the business grows. Problems can also arise during leadership succession planning or when the business will be closed, as all assets legally belong to the active partner personally, not to the CV.
The CV structure offers management flexibility without formal meetings like a PT, but with greater legal responsibility consequences for the active partner.
CV Requirements & Legality
To establish a CV, several documents are required:
Main Documents
- Establishment deed from a notary
- Business Identification Number (NIB)
- Company Tax ID Number (NPWP)
- Business license according to the field (if required)
Legal Risks
Although the process of establishing a CV is simpler, active partners still have full responsibility for company obligations. In cases of lawsuits or bankruptcy, the personal assets of active partners can become collateral to fulfil company obligations.
Taxation & Financial Reporting
Taxation System
The following is a comparison of the taxation system between CV and PT:
| Taxation Aspect | CV | PT |
|---|---|---|
| Tax Subject | Active partner | Business entity |
| Tax Type | Income Tax Article 21/25 | Corporate Income Tax (Article 25/29) |
| Tax Rate | Progressive (5-35%) | Single rate 22% |
| Dividends | No additional tax | Subject to dividend tax |
| Tax Planning | Less flexible | More options |
Learn the complete explanation about CV taxation here.
Financial Reporting
A CV is not required to publish financial statements like a public PT. However, regular bookkeeping is still necessary for internal purposes, tax reporting, performance evaluation, and negotiations with business partners or creditors.
CV Operations & Scalability
Not all types of businesses are suitable for the CV structure. Business actors should consider the following before deciding to establish a CV.
Tender Participation & Business Field Limitations
CVs can participate in tenders, although PTs are often prioritized for large projects. By regulation, there are no business field restrictions for CVs, but certain sectors such as banking, insurance, capital markets, mining, oil and gas, public infrastructure, and telecommunications generally require a PT structure due to public interest considerations and strict regulations.
Businesses that require large investments, aggressive expansion, or operate in strictly regulated sectors are better suited as PTs because of their more flexible capital structure and limited liability protection for owners.
CV Dissolution & Closure Risks
The CV dissolution procedure involves several stages:
- Creation of a dissolution deed by a notary
- Settlement of obligations to creditors and third parties
- Distribution of assets according to ownership proportion
- Announcement of dissolution in mass media
Legal Risks in Dissolution
Active partners remain responsible for unresolved obligations even after the CV has been dissolved. Closure without settling obligations can result in lawsuits, negative impact on reputation, difficulty establishing new businesses, and potential seizure of personal assets.
Transforming a CV to a PT
The following conditions indicate the need for transformation to a PT:
When to Transform
| Indicator | Recommendation |
|---|---|
| Annual turnover > IDR 4.8 billion | Consider transformation |
| Number of employees > 20 people | Consider transformation |
| Need for external investors | Highly recommended |
| High operational risk | Highly recommended |
| Expansion to international markets | Highly recommended |
| Future IPO plans | Transformation required |
Transformation Process
- Creation of a new PT establishment deed by a notary
- Transfer of assets and liabilities from CV to PT
- Registration with the Ministry of Law and Human Rights
- Arrangement of new business licenses in the PT’s name
- Dissolution of the CV after the transfer process is complete
A CV can be a strategic starting point before the business develops to a scale that requires legal protection and a stronger capital structure.
Conclusion
The decision regarding the form of business entity should consider growth projections, industry risk levels, long-term funding needs, sector regulatory requirements, and succession or exit strategy plans.
A CV can be the right choice to start, especially for entrepreneurs who are just starting a business with limited capital. As the business grows, the transformation from a CV to a PT can be done strategically to gain access to wider funding, increase credibility, and meet regulatory requirements when entering more regulated sectors. This status change is a natural part of successful business evolution.
Need Assistance with CV Establishment in Indonesia?
Establishing a Commanditaire Vennootschap (CV) in Indonesia requires various legal and administrative steps that must be carefully observed. Contact info@lexara.id to discuss your CV establishment needs and get expert guidance tailored to your business goals..
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