The importance of business legality is a fundamental aspect that every entrepreneur must understand, especially those who are starting a new business. Legality shows that a business operates lawfully and complies with applicable regulations.
By having complete legal documents, a business is not only officially recognized by the government, but also gains clear legal certainty and greater opportunities to receive investor support as well as access to financing from financial institutions.
So, what forms of business legality are required and why are they so important for business sustainability? Read the full explanation in this article.
What Is Business Legality?
According to the Indonesian Dictionary (KBBI), legality comes from the word “legal,” which means in accordance with laws and regulations.
Therefore, business legality can be defined as the legal status that shows a business operates lawfully and in compliance with applicable laws. This means the business has fulfilled regulatory requirements and is officially recognized by the state, making it essential for business owners to take care of legal registration from the very beginning.
Besides being a form of compliance, legality also serves as a business identity. With a clear legal foundation, a business appears more credible and is more easily trusted by consumers.
The Importance of Business Legality
Business legality indicates that a company has been officially recognized by the government through permits and legal documents in accordance with existing regulations. With complete legality, a business can operate in an orderly manner and have a strong legal basis.
Taking care of legal matters early helps business owners avoid legal risks, such as sanctions or business closure. On the other hand, official permits also increase trust from consumers, partners, and financial institutions.
Moreover, business legality opens opportunities to obtain various forms of support, ranging from easier licensing processes and access to financing to government programs. Therefore, legality is a crucial step to ensure that a business can grow and develop sustainably.
The Impact of Not Having Business Legality
Considering its vital role, ignoring business legality can lead to various risks. Below are some potential consequences if a business does not have official legal status:
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Violating regulations related to mandatory company registration, which may result in fines of up to IDR 3,000,000 or imprisonment for up to three months.
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Business activities may be suspended or shut down by local authorities due to the absence of valid permits.
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Decreased consumer trust because the business lacks a clear identity and legal certainty, causing customers to hesitate or even refuse to make transactions.
Types of Business Legality
To operate lawfully and in compliance with regulations, business owners need to understand the types of legal documents required. Below are some of the most common forms of business legality:
1. Business Identification Number (NIB)
The NIB is an official identity issued to business owners or entities after registering in the OSS system. This document serves as proof that the business is legally registered and can be used for various administrative purposes, such as opening a bank account or establishing business partnerships.
2. Taxpayer Identification Number (NPWP)
The NPWP is a mandatory tax identity for individuals and business entities to fulfill tax obligations. With an NPWP, tax reporting can be carried out properly and in an orderly manner. Without it, a business may face legal sanctions and lose opportunities to participate in tenders or access financing from financial institutions.
3. Business Domicile Certificate (SKDU)
The SKDU is a document that states the official address of a business and is issued by the local sub-district or district office. It is required for processing other business permits, as it proves that the business location is legitimate and officially recognized. Without an SKDU, further licensing processes may be hindered.
4. Company Registration Certificate (TDP)
The TDP is official proof that a company has been registered and legally recognized by the government. Although business registration is now integrated through the NIB, the TDP still functions as a marker of company legality.
5. Business Location Permit (SITU)
The SITU is required for businesses that use a specific location, such as a shop, office, or factory. Issued by the local government, this permit ensures that the business location complies with zoning regulations and can operate legally.
6. Trading Business License (SIUP)
The SIUP is an official permit for businesses engaged in the trading of goods or services. It serves as proof that the business has the legal right to conduct buying and selling activities in accordance with regulations.
7. Building Construction Permit (IMB)
The IMB is required for constructing, renovating, or modifying buildings used for business purposes. Issued by the local government after reviewing the site and construction plan, this permit ensures that the building complies with regulations. Without an IMB, construction may be deemed illegal and subject to termination.
8. Permit from the National Agency of Drug and Food Control (BPOM)
For businesses in the food, beverage, or pharmaceutical sectors, a BPOM permit is essential to ensure that products are safe for consumption. This permit also increases consumer trust, as products are officially registered and supervised by the authorized body.
9. Environmental Permit
An environmental permit is required for businesses that may have an impact on the environment, such as factories or waste-producing operations. This permit ensures that business activities comply with environmental standards set by the government and are conducted responsibly.
10. Industrial Business License (SIUI)
The SIUI is an official permit for companies engaged in industrial activities, especially large-scale manufacturing. It signifies that the business is legally registered with the government and provides access to special facilities available only to licensed industries.
Having business legality is not merely a formality; it is a vital foundation for ensuring that a business operates safely, gains trust, and remains sustainable. With legal recognition, business owners can more confidently expand their operations, build partnerships, and access various funding opportunities.
In building and growing a legally compliant business, financial needs often become an integral part, ranging from processing legal documents and increasing working capital to developing business assets.
For this reason, BFI Finance is ready to be your solution through financing secured by Motorcycle Ownership Certificates (BPKB Motor), Car Ownership Certificates (BPKB Mobil), or House/Shop/Office Certificates, tailored to your needs. All BFI Finance services are licensed and supervised by the Financial Services Authority (OJK), ensuring a safe, transparent, and trustworthy process.
So, don’t hesitate to take the next step in building a legal business, because #SelaluAdaJalan with BFI Finance.
