In Indonesia’s business landscape, partnerships and firms are often considered similar because both involve collaboration. However, they are fundamentally different in terms of legal status, structure, and objectives. In short, a partnership is a strategic collaboration model between businesses of different scales, while a firm is a business entity formed by partners operating under a common name.
Definition of Partnership
A partnership is a form of cooperation that connects small or medium-sized enterprises with larger businesses. Its objectives include empowerment, knowledge transfer, and opening market access. Its legal basis includes Law No. 20 of 2008 on MSMEs and Government Regulation No. 44 of 1997 on Partnerships.
In a partnership, each party maintains its own business identity. This relationship is more flexible because it only requires an agreement without the need to establish a new legal entity.
Also Read: What is the Difference Between Firms and Companies in Indonesia?
Definition of a Firm
A firm is a business entity regulated under Articles 16–35 of the Indonesian Commercial Code (KUHD). A firm is established through a notarial deed, registered with the Ministry of Law and Human Rights, and announced in the State Gazette.
Each partner has the right to act on behalf of the firm, and their liability is joint and several. This means that the company’s obligations are the full responsibility of all partners, without separating personal assets.
Firms are widely used in professional service sectors such as law firms or public accounting firms.
Also Read: Characteristics and Features of Firms in Indonesia
Main Differences Between Partnerships and Firms
Nature and Purpose
- Partnership: to foster and develop MSMEs through cooperation with larger businesses.
- Firm: focused on joint business operations to generate profit.
Legal Structure
- Partnership: not a legal entity, only a cooperation agreement.
- Firm: a formal business entity with a common name.
Also Read: Is a Firm Considered a Legal Entity in Indonesia?
Liability
- Partnership: each party is responsible according to their role, without joint liability.
- Firm: all partners are jointly and severally liable for the firm’s debts.
Establishment
- Partnership: sufficient with a written agreement.
- Firm: requires a notarial deed, registration, and official announcement.
Business Fields
- Partnership: flexible, can be applied across all economic sectors.
- Firm: commonly found in professional services.
Also Read: Firm Establishment Capital in Indonesia: Key Characteristics and Considerations
Which is Right for Your Business?
If your goal is strategic collaboration between different business scales (for example, MSMEs with larger corporations), then a partnership is more suitable. However, if you want to establish a business entity together with equal partners, a firm is the right choice.
Also Read: How to Establish a Firm in Indonesia
Professional Firm Establishment Services
If you want to establish a firm, it is essential to ensure all documents and legal processes comply with regulations. vOffice provides comprehensive Firm Establishment Services complete with a bonus virtual office. This service helps you obtain official legality as well as a professional business address without large costs.
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FAQ
What is the main difference between a partnership and a firm?
A partnership is a collaboration model between businesses, while a firm is a business entity formally recognized by law.
Does a partnership need to be registered with the Ministry of Law and Human Rights?
No. A written agreement between the parties is sufficient.
Can a firm be established without a notary?
No. A firm must be established through a notarial deed and officially registered.
What fields are suitable for firms?
Typically professional services such as law, accounting, and consulting.
What are the risks of establishing a firm?
Partners are jointly and severally liable for the firm’s debts, including personal assets.
