PT PMA vs. Local Partner: Which is the Best Option for Foreigners Starting a Business in Bali?

Bali has long been a dream destination for entrepreneurs looking to start a business in the paradise island. Whether it’s a boutique hotel, a beachfront café, a surf school, or a wellness retreat, the opportunities are vast. However, for foreign investors, starting a business in Bali isn’t as simple as registering a company under their own name. Indonesia has strict regulations regarding foreign ownership, which means foreigners must choose between two main options: setting up a PT PMA (Foreign-Owned Company) or partnering with a local Indonesian citizen.

Both options have their own benefits, costs, and risks. Choosing the right one depends on the type of business you want to build, the level of control you seek, and the budget you have. Let’s dive into the details and compare PT PMA vs. Local Partner to help you determine the best structure for your business in Bali.

What is a PT PMA?

A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a Foreign-Owned Limited Liability Company. This is the most secure way for foreigners to legally own and operate a business in Indonesia. With a PT PMA, a foreign investor can hold shares in the company, fully own the business (if the industry allows), and operate under Indonesian law.

Setting up a PT PMA requires compliance with regulations set by BKPM (Badan Koordinasi Penanaman Modal), the government agency responsible for foreign investment. Depending on the business type, some industries may require a local partner to hold a minority share.

Pros of Setting Up a PT PMA

One of the biggest advantages of a PT PMA is legal ownership and business security. Foreigners have full control over their operations and do not have to rely on a local partner. A PT PMA also allows the business owner to apply for a KITAS (work visa) and legally hire both local and foreign employees.

Another benefit is that a PT PMA provides long-term stability, making it the best option for those looking to run a business in Bali for years to come. It also builds credibility, as many clients and investors prefer to work with legally registered foreign companies rather than businesses operated through informal agreements.

Cons of a PT PMA

Despite its benefits, setting up a PT PMA is more expensive and complicated than partnering with a local. The minimum investment requirement is IDR 10 billion (around USD 650,000), though not all of it needs to be deposited upfront. However, investors must show a business plan and financial reports proving they have sufficient capital to run the business.

The legal process also takes longer. Registering a PT PMA can take several months, as it involves multiple steps such as obtaining a Business Identification Number (NIB), necessary operational permits, tax registration, and opening a corporate bank account.

What is a Local Partnership?

A local partnership is a simpler and more affordable way for foreigners to run a business in Bali. Instead of registering a PT PMA, the business is legally owned by an Indonesian citizen under a local PT (Limited Liability Company) structure. The foreign investor typically enters a private agreement with the local partner, outlining the profit-sharing and management responsibilities.

This setup is commonly used for small businesses such as cafés, bars, surf schools, and boutique hotels, where the foreign investor acts as the manager while the local partner is the legal owner on paper.

Pros of Partnering with a Local

One of the main reasons foreigners choose to partner with a local is because it is cheaper and faster. Since a local PT does not have the same strict capital requirements as a PT PMA, registration costs are lower. The process is also much quicker, allowing the business to start operating in just a few weeks.

This option is also beneficial for those who don’t plan on investing a large amount of money upfront. It provides a way to test the market without making a long-term commitment.

Cons of Partnering with a Local

The biggest downside of a local partnership is lack of legal ownership. Because the business is officially registered under the Indonesian partner’s name, the foreign investor has no legal claim to the company. If disputes arise, the foreigner has little legal protection, and in some cases, local partners have taken full control of the business, leaving the investor with nothing.

Additionally, some industries—such as property rentals and tourism businesses—require licenses that only the legal owner (the Indonesian partner) can obtain. This means that if the relationship between the foreign investor and the local partner breaks down, the foreign investor may lose access to the necessary permits and legal documentation.

PT PMA vs. Local Partner: Which One Should You Choose?

A foreign investor discussing business documents with a local notary on an outdoor terrace of a Bali villa, surrounded by tropical plants.

The best option depends on several factors, including budget, risk tolerance, and long-term goals. If you are serious about building a long-term business, have enough capital, and want full legal ownership, then a PT PMA is the best choice. This structure provides security, allows you to apply for a work visa, and ensures you have full control over your business operations.

However, if you are starting with a small budget, need a fast and low-cost setup, and are willing to work with a trusted local partner, then a local partnership might be a more practical option. It allows for quick market entry and lower costs, but it comes with higher risks if the partnership is not legally structured properly.

For those who choose a local partnership, it is critical to have a well-drafted legal agreement to protect your investment. Consulting with a lawyer before entering into a partnership can help avoid potential disputes in the future.

Final Thoughts: Making the Right Decision

Both PT PMA and local partnerships offer different advantages, and the right choice depends on your business vision and financial situation. If you have the capital and want full security, setting up a PT PMA is the best way to go. However, if you are looking for a quicker and cheaper way to enter the market, a local partnership can work—as long as it is structured correctly with legal protection.

Navigating Indonesia’s business regulations can be complex, but you don’t have to do it alone. Noethera offers expert assistance in business registration, website development, and digital marketing to help you start your Bali business the right way. Contact us today and let’s build your dream business in paradise! 🚀