Do MSMEs Require Business Licenses? The Importance of Business Identification Numbers for Business Legality and Business Sustainability

Introduction 

The government continues to simplify the business licensing system, specifically for Micro, Small, and Medium Enterprises ("MSMEs"), through the implementation of Risk-Based Business Licensing. Through this system, the licensing process that was previously conducted through various mechanisms is now integrated into the Online Single Submission ("OSS") electronic system. Under this system, a Business Identification Number (Nomor Induk Berusaha, "NIB") serves as the identity and proof of registration that must be possessed by every business actor. An NIB enables business actors to conduct business activities legally while accessing various services and subsequent licensing through the OSS system. 

Legal Basis 

The obligation to possess an NIB is stipulated in Government Regulation Number 28 of 2025 on the Implementation of Risk-Based Business Licensing ("GR 28/2025"). GR 28/2025 replaces Government Regulation Number 5 of 2021 on the Implementation of Risk-Based Business Licensing and serves as the legal basis for the implementation of Risk-Based Business Licensing in Indonesia. 

The following are the provisions in GR 28/2025 that regulate the obligation to possess an NIB, among others: 

Article 4 paragraph (1) of GR 28/2025 

"To conduct business activities, Business Actors must possess a PB." 

This article stipulates that every business activity must have a Business License (Perizinan Berusaha, "PB"). Under these provisions, PB consists of an NIB, Standard Certificate, and License in accordance with the risk level of the business activities. Therefore, every business actor, including MSMEs, must possess an NIB as part of the business licensing process. 

Article 206 paragraph (1) of GR 28/2025 

"An NIB must be possessed by every Business Actor." 

This article obligates every business actor to possess an NIB. In addition, this article also clarifies that the NIB functions as proof of registration as well as the identity of the business actor in conducting business activities. The subsequent provisions further regulate the functions of the NIB for specific purposes, including import activities, while the obligation to possess an NIB is already stipulated in this paragraph. 

Article 128 paragraphs (1) and (2) of GR 28/2025 

"(1) Based on the assessment of the hazard level and the assessment of the potential occurrence of hazards as referred to in Article 127 paragraphs (2) to (5), the Risk level and rating of the business activity scale, are determined into: 

a. low-Risk business activities; 

b. medium-Risk business activities; and 

c. high-Risk business activities. 

(2) Medium-Risk business activities as referred to in paragraph (1) letter b are divided into:

a. medium-low Risk level; and 

b. medium-high Risk level." 

This article classifies business activities based on their risk levels into low, medium-low, medium-high, and high risk categories. This classification serves as the basis for determining the type of Business License that must be obtained by business actors in accordance with their business activities. 

Article 130 of GR 28/2025 

"PB for low-Risk business activities as referred to in Article 128 paragraph (1) letter a is in the form of an NIB which serves as the identity of the Business Actor as well as the legality of the implementation of business activities." 

This article stipulates that for low-risk business activities, the NIB is valid as both the identity and the Business License for business actors. 

Article 1 number 21 of GR 28/2025 

"The Electronically Integrated Business Licensing System (Online Single Submission) hereinafter referred to as the OSS System is an integrated electronic system managed and administered by the OSS institution for the implementation of PBBR." 

This provision stipulates that the implementation of Risk-Based Business Licensing (Perizinan Berusaha Berbasis Risiko, "PBBR") is carried out through an integrated electronic system known as the OSS System, which is managed by the OSS Institution. 

Benefits of Possessing an NIB 

Possessing an NIB provides various benefits for MSMEs, both in conducting business activities and in accessing services and subsequent licensing. 

1. Business Legality: The NIB indicates that the business activity has been registered in the OSS system and has obtained a Business License in accordance with applicable provisions. Furthermore, the NIB also serves to replace several previous licensing documents, such as the Trade Business License (Surat Izin Usaha Perdagangan, “SIUP”), Company Registration Certificate (Tanda Daftar Perusahaan, “TDP”), and Certificate of Business Domicile (Surat Keterangan Domisili Usaha, "SKDU"). Possessing an NIB can also assist business actors in establishing cooperation with customers and business partners. 

2. Access to Government Programs and Financing: Various government programs, including the People's Business Credit (Kredit Usaha Rakyat, "KUR"), business training, and MSME mentoring programs, generally require an NIB in the application process. Therefore, possessing an NIB can facilitate business actors in accessing these programs. 

3. Ease of Processing Subsequent Licenses: The NIB also serves as one of the requirements in processing subsequent licensing, such as Halal Certification, marketing authorization from the Indonesian Food and Drug Authority (Badan Pengawas Obat dan Makanan, "BPOM"), and Home Industry Food Production Certificate (Sertifikat Produksi Pangan Industri Rumah Tangga, "SPP-IRT"). With business data already registered in the OSS system, the application process for subsequent licensing can be carried out in a more integrated manner. 

Administrative Sanctions 

Business actors who violate basic requirements, Business Licensing (PB), and/or UMKU PB may be subject to administrative sanctions as set forth in Article 355 paragraph (1) of GR 28/2025. Based on Article 355 paragraph (2) of GR 28/2025, such administrative sanctions may take the form of warnings, temporary suspension of business activities, imposition of administrative fines, imposition of governmental coercion, revocation of licenses/certifications/approvals, and/or revocation of basic requirements, PB, and/or UMKU PB. 

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Recommendations 

MSME actors who do not yet possess an NIB should immediately register their businesses through the OSS system. The registration process is carried out electronically through the official OSS website by preparing basic data, such as ID Card (KTP), Taxpayer Identification Number (Nomor Pokok Wajib Pajak, “NPWP”), as well as information regarding the type and location of the business. Possessing an NIB can assist business actors in conducting business activities in accordance with applicable provisions while facilitating access to various services, government programs, and subsequent licensing required in business development. 

Closing

Based on GR 28/2025, every business actor, including MSMEs, must have a Business License through the OSS system with the NIB as proof of registration and identity of the business actor in conducting business activities. This obligation applies to all business risk levels, where the NIB serves as both identity and Business License for low-risk businesses, whereas businesses with medium to high risks remain obligated to fulfill business standards or obtain additional licenses in accordance with applicable provisions. In addition to being part of fulfilling licensing obligations, possessing an NIB also facilitates business actors in legally conducting business activities, accessing government programs such as the People's Business Credit, and processing subsequent licensing, such as Halal Certification, marketing authorization from the Food and Drug Supervisory Agency, and Home Industry Food Production Certificate. Conversely, business actors who conduct business activities without a Business License or fail to comply with licensing provisions may be subject to administrative sanctions, ranging from written warnings to revocation of the Business License. Therefore, possessing an NIB through the OSS system is a crucial step for MSMEs to conduct business activities in accordance with applicable provisions while supporting sustainable business development.