Did you know that a firm is one of the oldest forms of business entity that still exists today?
However, are you familiar with legal basis and implementation of firm?
If you’re considering setting up a business with a partner, this article will help you understand the intricacies of a firm in terms of legalities and set-up procedures.
What is a Firm?
In simple terms, a firm is a form of partnership established by two or more people to run a business together.
In a firm, the members or allies are personally liable for all risks and liabilities of the firm.
Each ally has unlimited liability for the debts and obligations of the firm.
Legal basis about Firm regulated in the Kitab Undang-Undang Hukum Dagang (KUHD), specifically in Articles 16 through 35.
The following are some legal arguments related to firms:
- Article 16 KUHD
A firm is a partnership formed based on an agreement between two or more people to run a business together under the same name.
- Article 18 KUHD
A firm must be established by an authentic deed made before a notary and published in the State Gazette of the Republic of Indonesia in order to be valid as law against third parties.
- Article 19 KUHD
All allies in the firm are fully and personally liable for all obligations taken on by the firm.
This means that not only the capital of the firm is at stake, but also the personal assets of the allies if the firm is unable to repay its debts.
- Article 20 KUHD
Every ally in the firm is entitled and obliged to act on behalf of the firm, unless there is another agreement governing.
A firm is usually an option for those who want to run a business with equal distribution of rights and obligations.
For example, a lawyer or accountant often forms a firm to run their professional practice.
By legal basis legal basis, the establishment of firm provides legal certainty for its allies in running a joint venture.
It allows allies to work together to achieve business goals, while still understanding the legal consequences that may arise.
Read also: Get to know more about Limited Liability Company (PT)
What are the Characteristics of a Firm?
There are several characteristics that distinguish firms from other forms of business entities.
Here are some of the main characteristics that you need to know:
- Civil partnership
A firm is a form of civil partnership established by agreement between the allies.
- Unlimited Responsibility
Each ally is fully liable for the company’s liabilities and debts, even to the extent of personal assets if necessary.
- Shared Leadership
There is no strict hierarchy in a firm.
All allies have equal rights in managing the company, unless otherwise agreed in the agreement.
- Equal Share of Risk and Profit
All profits and losses earned by the firm will be divided equally according to the agreement between the allies.
- No Legal Entity
A firm does not have the status of a separate legal entity from its allies.
Legally, a firm is considered an extension of its allies.
What is the Difference between CV and Firm?
You might be wondering, what’s the difference between a firm and another form of business entity such as a CV (Commanditaire Vennootschap)?
While both are forms of partnership, there are fundamental differences between firms and CVs that you need to understand:
- Allied Responsibility
In a firm, all the allies are fully responsible for the company’s liabilities.
Whereas in a CV there are two types of allies, namely active allies who are fully responsible and passive allies who are only responsible for their capital.
- Leadership Structure
In a firm, all allies have equal rights in managing the company.
While in a CV, only the active ally has the right to manage the company.
- Capital
In a firm, each ally makes a deposit equally.
While in a CV, passive allies can deposit capital without being involved in management.
- Legal Entity Status
Neither firms nor CVs have separate legal entity status from their allies.
What are the Advantages of a Firm?
Firms have several advantages that make them an attractive option for entrepreneurs.
Some of the advantages are:
- All allies have equal rights in decision-making, so there is no domination from one party.
- Risks and responsibilities are shared among allies, so the burden is not borne by just one person.
- The process of establishing a firm is simpler than other business forms such as PT.
- There is no minimum capital requirement to set up a firm, making it more flexible for budding entrepreneurs.
What are some examples of firms?
You may have heard of some well-known examples of firms in Indonesia, especially in the legal and services sectors.
Here are some examples:
- Law Firms: Many lawyers form firms to practice law, such as the ABC Law Firm.
- Accounting Firms: Accounting firms are also popular, where professional accountants join forces to provide financial and taxation services.
- Trading Firm: A firm can also be engaged in trading, where two or more traders join forces to run a business together.
Read also: What is the Importance of Foundation Articles of Association?
Requirements for Establishing a Firm
To establish a firm, there are several requirements that must be met in accordance with the applicable laws in Indonesia.
Some of these requirements include:
- Have at least two allies who agree to cooperate in the partnership.
- Prepare a deed of establishment drawn up by a notary public and authorized by the local District Court.
- Register the firm with the Ministry of Law and Human Rights.
- Draw up a clear cooperation agreement, including the division of profits, responsibilities, and capital by each ally.
Process and How to Establish a Firm
Setting up a firm is actually not that difficult as long as you understand the steps to follow.
Here’s the general process of setting up a firm:
- Prepare the Deed of Establishment
The first step is to draft the deed of establishment of the firm before a notary public.
This deed will be the legal basis of your firm.
- Registration at the District Court
Once the deed of establishment is issued, you must register it with the District Court for legalization.
- Business License Processing
Just like any other business, a firm also needs a business license in accordance with the field you are in.
You can apply for this license at the Trade Office or related institutions.
- Registration at the Ministry of Law and Human Rights
Finally, you’ll need to register the firm with the Ministry of Law and Human Rights to obtain an authorization number.
Contract Law is ready to help you establish your firm!
Do you want to set up a firm but are still confused about the legal procedures and requirements?
Calm down, Contract Law ready to help you! With a team of experienced professionals, we will ensure that the process of establishing your firm runs smoothly and in accordance with applicable laws.
Kontrak Hukum also has a Business Community for businesses and workers who want to share information about employment and legal consultation. This community is free and open to anyone by registering at this link. Selain itu, jika Anda tertarik untuk mendapatkan penghasilan tambahan, Anda juga bisa menjadi bagian dari Affiliate Program Kontrak Hukum. Langsung daftar di the following linkyes!
