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tarting a business is exciting—but overlooking key legal matters can lead to serious setbacks. Many startups focus heavily on product development, marketing, or fundraising, but neglect legal structure, compliance, and documentation.
In this article, we break down the top 5 legal mistakes startups in Indonesia often make—and how to avoid them with proactive planning and the right legal support.
Choosing the Wrong Business Structure
Many startups begin as informal businesses or choose a structure that limits growth. For example, operating as a sole proprietorship (UD) may be easier at first but lacks legal separation between the owner and the business.
Why It’s a Problem
What to Do
Register a Perseroan Terbatas (PT) or, for foreign-owned businesses, a PT PMA, to benefit from legal identity, limited liability, and investment flexibility.
Not Having a Written Founders’ Agreement
Many startup founders jump into business with friends or colleagues without clearly defining roles, responsibilities, or equity splits.
Why It’s a Problem
What to Do
Create a Founders’ Agreement or include specific clauses in your Articles of Association covering:
- Voting rights
- Roles & responsibilities
- Vesting schedule
- Exit or dissolution terms
Using Informal Contracts—or No Contracts at All
Verbal agreements or informal email confirmations may seem convenient, but they lack enforceability and clarity.
Why It’s a Problem
What to Do
Always use formal written contracts, reviewed or drafted by a legal professional. Key contracts include:
- Client or service agreements
- Employment or contractor agreements
- NDA (Non-Disclosure Agreements)
- Investment term sheets
Ignoring Intellectual Property (IP) Protection
Many startups overlook registering their trademarks, logos, or digital content until it’s too late—when someone else copies or registers them first.
Why It’s a Problem
What to Do
Failing to Comply with Licensing & Tax Obligations
Startups often delay registering their business formally or skip tax filings—especially if they’re in early stages or not profitable yet.
Why It’s a Problem
What to Do
Many startups in Indonesia fall into the same avoidable legal traps—starting with choosing the wrong business structure, such as operating as a sole proprietorship without the benefits of limited liability. Others overlook the importance of a founders’ agreement, which is crucial for avoiding internal disputes and setting clear expectations early on. A common mistake is also relying on informal or verbal agreements, leaving the business vulnerable in case of a breach. Intellectual property protection is often ignored until it’s too late, exposing startups to brand theft and legal risk. Lastly, failing to register properly or ignoring tax and licensing obligations can lead to fines, ineligibility for funding, and long-term compliance issues. By addressing these risks early, startups can build a legally sound foundation for growth and success.
At AUFAR & Co Law Office, we support startups at every stage—from choosing the right legal structure to drafting contracts and securing intellectual property rights. We offer:
- Company registration (PT & PT PMA)
- Legal document drafting (contracts, agreements)
- Trademark registration & brand protection
- Ongoing compliance support
