The Israeli economy is among the world’s most stable and secure. As a result, it draws an increasing number of investors every year. Even though starting a business in Israel is easy, you can still use an experienced Israeli law firm to help you run a foreign-owned business in Israel.
Types of business formation in Israel
Israel has many ways to start a business, including solo entrepreneurship (Osek Patur and Osek Murshe), private companies, public companies, partnerships, cooperations, international companies, and two types of non-profit organizations.
A sole proprietorship is another name for individual entrepreneurship in the USA.
Depending on the annual business income, an individual is eligible to create and operate a business under one of two categories.
First off, one of the most basic company classification systems in this country is called Osek Patur (little business). As of 2020, this type of business is employed when the company’s yearly financial turnover is under 100,491 NIS (around 30,000 USD annually). The company has a cap on its annual turnover, which is revised every year.
Second, Osek Murshe is under the category of companies that must pay VAT on all transactions. On the other side, VAT can be refunded on inbound commercial activities including rented space, raw material purchases, and other essential business expenses. Additionally, this kind of legal entity is not restricted to the higher turnover, allowing the firm to grow. Additionally, the registration of a company such as Osek Murshe permits the hiring of employees.
Types of Israeli companies
The Companies Law governs businesses in Israel (1999). The Companies Ordinance governs several business-related issues in the country, including pledges, liquidations, security bonds, and more (1983). The vast majority of Israeli businesses are restricted by shares (Ltd). A business may register as either a “Public Company” or a “Private Company.” Both kinds of businesses are required to create and provide an annual report to their shareholders that includes their audited financial statements.
One or more directors are required for a private company. Additionally, there are a set number of shareholders. A maximum of 50 shareholders may be added after the initial one shareholder. The public cannot purchase shares or debentures from this corporation. Also, the articles of incorporation must specify the restriction on the transferability of its shares.
A public company needs a minimum of two directors and seven shareholders. Following the guidelines of the ICO and the Securities Law, it may make its shares and debentures available to the general public. A public corporation must also provide an annual report every year that includes the directors’ report and audited financial statements.
Legal partnership
General partnerships and restricted partnerships are the two varieties of partnerships. There must be at least one general (unlimited) partner for a limited partnership. The limited partner is not permitted to take part in business management. Otherwise, as a general partner, he will be responsible for the partnership’s debts. Except for Israeli law firms, which frequently take the form of partnerships, this sort of legal entity is uncommon in Israel.
Co-operative
This kind of legal company is mostly created for the transportation and agricultural industries. A cooperative can be established in one of two ways:
- by one or more people or businesses that are not cooperatives
- by one or more cooperatives themselves.
Setting up a business in Israel by a foreign citizen
Foreign nationals may start a business in Israel, but certain conditions must be met.
First, a foreign person must choose a guarantor for tax purposes to form a legal organization in the country. This guarantor, who must be an Israeli citizen, is typically a business partner, friend, relative, Israeli spouse, or the company’s attorney or accountant. The guarantor will be required by law to accept the foreign national’s obligations.
Second, the most popular and straightforward type of business entity that a foreigner can create is a Limited Liability Company (Ltd).
