Starting a business in Israel

Israel’s stable economy is a favorable environment for starting your own business. Starting a business in Israel is quite easy. The state does not complicate this process, but rather helps private business to develop. Small and medium businesses are the main budget-forming countries. New companies open here every day. Statistics show that private business brings about 40% of the country’s GDP. A transparent business system, as well as loyal taxation, contribute to the favorable development of this area.

How to start a business in Israel

First of all, you should decide on the direction in which you want to develop your business. The Israeli state actively supports small and medium-sized businesses, so starting your own business will be a good idea. There are a number of areas, opening a business in which you will definitely not lose money and achieve success:

Types of business formations in Israel

The most common in Israel is the legal form of LTD Company. Other organizational and legal forms:

Company Registration

The next step, after you have chosen the scope, concept and developed a business plan, will be the legal registration of the business. Legal clearance is a mandatory step, otherwise you may get in trouble with the law. In Israel, financial discipline is strictly observed.

The main steps of a businessman on the way to a successful business in Israel:

1. Registration of a bank account;
2. Submission of documents to the tax office;
3. Accounting with the National Insurance Office;
4. Confirmation of insurance accounting for tax;
5. Registration.

Private Ltd Company

An LTD, or chevra baam, in Israel is a large business that can work with other companies and even have access to the international market. A Limited Trade Development (LTD) may have several founders. As the name suggests, LTD owners are not liable for the company’s debts. The authorized capital of Chevra Baam is $ 2,700

Pros:

• Uniform income tax (Mas Akhnasa) – with high profits, this is a significant advantage;
• No need to pay Bituach Leumi (social insurance);
• The image of an LTD is higher than that of an individual entrepreneur – this is already a real business with shareholders, directors and employees;
• Legal liability – chevra baam is an independent legal entity, unlike an individual entrepreneur, where the owner is personally responsible;
• You can choose a unique name and register a trademark;
• Transparency of accounting – accounting is carried out using a double entry system;
• Founders and shareholders can receive salaries and be entitled to social benefits, unlike individual entrepreneurs

Cons:

• High cost of accounting services and annual reports;
• High state duty to the Register of Companies, which must be paid annually;
• There is no opportunity to freely use the company’s money – money can be withdrawn through salaries, dividends or investment in assets;
• When opening a bank account, you need to provide a lot of documents.

Public Company

Advantages and disadvantages of public limited company. The main advantage of a joint-stock company is the lack of liability of shareholders for the debts and obligations of their company: if the company is threatened with bankruptcy, shareholders are not required to pay debts from their own funds. A significant plus is the possibility of public trading in shares as a means of attracting investment. The third advantage is a single corporate tax. The owner of a public company can register a trademark, which significantly affects the image of the company.

Foreign Company

A foreign company wishing to enter the Israeli market can choose from two options for registering a foreign company:

A subsidiary is a local private limited company owned and operated by a foreign company. All of its shareholders can be foreign persons, but at least one representative from among the residents of Israel is required. He will act as a tax guarantor. A subsidiary can count on tax benefits, as it is considered a local company. A subsidiary is an independent company. It is not responsible for the obligations of the head office.

VAT

It is important to understand here that even the lack of profit cannot be a reason for not filing a tax return. Reports must be prepared in accordance with the established frequency. The main taxes include the following list:

Self-Employment (Atzmai)

If you are an atzmai (part or full self-employed), you will need to file tax returns with the tax authorities. You also need to make your own contributions to the pension fund so that you can count on a decent pension in old age.

Osek Patur

In Israel, there are two forms of private enterprise – esek patur and esek murshe. They differ from each other not only in how they are taxed, but also in how they are managed and controlled.

Features of Osek Patur:

Osek Murshe

Features of Osek Murshe:

Setting up a business as a foreign citizen

It should be noted right away that having your own enterprise in Israel will not give a foreigner any privileges in relation to the accelerated acquisition of Israeli citizenship. Also, the business owner may not expect to receive any prerogatives regarding the procedure for visiting the country.