Since the enactment of the Job Creation Law, more entrepreneurs are opting to establish Sole Proprietorship Companies (Individual Companies). According to this law, a Sole Proprietorship Company is a limited liability company founded by a single individual who acts as both the shareholder and Director to meet the requirements as a micro or small business.

Though the establishment process is simpler, Sole Proprietorship Companies have several obligations that must be complied with. In this article, we will discuss some of the main obligations that must be fulfilled by Sole Proprietorship Companies.

One of the main obligations of a Sole Proprietorship Company, whether classified as micro or small business, is to prepare and report annual financial statements to the Ministry of Law and Human Rights through the “AHU Perseroan Perorangan” application. According to Article 10 of Government Regulation Number 8 of 2021, these financial statements must at least include the Balance Sheet, Profit and Loss Statement, and Notes to the Current Year’s Financial Statements. Reporting must be done no later than 6 months after the end of the accounting period.

Failure to comply with financial reporting obligations can result in serious sanctions, such as written warnings, suspension of Online Single Submission (OSS) access rights, to revocation of legal entity status.

Additionally, Sole Proprietorship Companies classified as small businesses are also required to report Investment Activity Reports (LKPM) every 6 months. Reporting must be done no later than the 10th of July for Semester I and the 10th of January for Semester II, based on Article 32 paragraph (6) letter a of BKPM Regulation 5/2021. Sanctions for non-compliance with LKPM reporting include written warnings, temporary suspension or freezing of business activities, to revocation of business licenses or NIB.

Apart from reporting obligations, Sole Proprietorship Companies must also pay attention to changes in status that may occur. If a Sole Proprietorship Company has exceeded certain criteria, such as having more than one shareholder or not meeting the micro and small business criteria, then it is required to change its status to a regular PT. The status change process involves drafting a status change deed that must be electronically registered with the Ministry of Law and Human Rights.

Lastly, Sole Proprietorship Companies also have tax obligations to comply with. This includes collecting and depositing VAT and Luxury Goods Sales Tax on taxable goods and services transactions, issuing tax invoices, reporting VAT Periodic Tax Returns, and uploading e-Invoices according to applicable regulations. Failure to comply with tax obligations can result in sanctions, such as inability to register Online Single Submission (OSS), tarnished company image and credibility, financial management difficulties, to revocation of business licenses or NIB.

By understanding and complying with these obligations, Sole Proprietorship Companies can smoothly run their businesses, support business growth, and maintain business sustainability in an increasingly competitive market.