Starting a Business
Professional Guidance from Day One
Opening a business is one of the most significant decisions you will make, with long-term legal, tax, and financial implications. Having an accountant guide you from the planning stage — before submitting a single document to the authorities — can save tens of thousands of shekels, prevent costly mistakes, and avoid problems with the Tax Authority, VAT, and National Insurance (Bituach Leumi). Our office accompanies new businesses in Israel from the very first moment through to stable, grounded growth.
What Is the Right Business Structure for You?
One of the first questions every entrepreneur faces is: should I open a sole proprietorship (Osek Patur or Osek Murshe) or a limited liability company (Ba'am)? There is no one-size-fits-all answer. The choice depends on the expected scope of activity, the type of clients, the expense structure, and long-term tax planning. Understanding the differences between the types can save significant money and directly impact your profitability.
Osek Patur
Suitable for small businesses with an annual turnover below the ceiling set by law (approximately NIS 120,000). Exempt from collecting VAT, but limited in the scope of activity. Maintains simple bookkeeping and is not required to file periodic VAT reports.
Osek Murshe
Suitable for self-employed individuals with higher turnover, or when clients are businesses that want to offset VAT. Collects and reports VAT, files periodic returns, and can deduct business expenses.
Limited Liability Company (Ltd.)
A separate legal entity with limited liability. Offers advantages in tax planning, attracting investors, and working with large clients. Requires registration with the Companies Registrar, double-entry bookkeeping, and compliance with additional legal obligations.
Small Business Owner
A unique status vis-à-vis income tax (unrelated to the Osek Patur or Osek Murshe classification for VAT purposes), which allows — under certain conditions — recognition of a standard expense deduction of 30% of revenue, regardless of actual expenses. Suitable for small businesses or employees who combine a side business and want to save on tax costs. A small business owner can choose to enter the track of exemption from an annual income tax return, or file a tax return and gain additional benefits (statute of limitations on the assessment, deductions and credits not available under the exemption track, and cases where inclusion in the exemption track is not possible).
The decision is not final — it is possible to change the business structure in the future, but a transition involves costs and tax risks. Therefore, it is important to make an informed decision from the outset with professional advice.
The Trapped Profits Law
At the end of 2024, the Trapped Profits Law was enacted, significantly changing the attractiveness of forming a limited company. The law imposes an additional tax on income accumulated in a company that is not distributed as dividends. Before establishing a company, it is essential to examine the impact of this law on your personal and business tax planning — in some cases, remaining a sole proprietor will be more advantageous. We help evaluate this before the decision is made.
What Does Our Establishing a Business Service Include?
We offer a comprehensive and complete service — from initial consultation through to building a financial and operational infrastructure that allows you to start working with confidence, knowing that all files are open as required.
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Feasibility analysis and recommendation on business structure: In-depth analysis of the nature of the activity, expected income, expense structure, and tax planning needs, including consideration of the Trapped Profits Law that came into effect at the end of 2024.
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Opening files with all relevant authorities: Income tax, VAT, National Insurance, Companies Registrar (in the case of a limited company), and local authorities as needed. We manage the process for you, without unnecessary hassle.
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Tax planning from day one: Building a sound tax strategy that saves money over time, including utilizing tax benefits, allowable deductions, and proper expense management from the very first day of business activity.
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Building a financial management infrastructure: Guidance on proper bookkeeping, separation of personal and business accounts, choosing appropriate financial management tools, and an efficient invoicing and payment system.
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Ongoing advice during the opening phase: Close accompaniment during the first weeks and months of activity, providing real-time answers to questions and coordinating with the authorities as needed.
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Preparation for ongoing reporting: Explanation and guidance on important reporting deadlines, periodic VAT reports, income tax advance payments, and National Insurance contributions — so you won't be surprised by fines.
Step By Step Process - How We Work Together
Who Is the Service Suitable For?
This service is intended for a wide range of people and businesses, including:
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Entrepreneurs starting out
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Employees who want to become self-employed (including simultaneously)
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Freelancers expanding their activity
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Businesses with partnerships
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Businesses seeking to change their corporate structure
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Businesses seeking to incorporate as a company
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Liberal professionals
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Veterans opening a business after military service.
Frequently Asked Questions – Starting a Business in Israel
What is the difference between an Osek Patur and an Osek Murshe?
An Osek Patur is exempt from collecting VAT and limits annual revenue to the ceiling set by law. An Osek Murshe collects VAT and transfers it to the Tax Authority, but can also offset VAT on expenses. The choice depends mainly on the level of income, the type of business (not every business can register as an exempt dealer), and the type of clients.
Is it worthwhile to open a limited company from the start?
Not always. A limited company involves higher formation and maintenance costs, and stricter reporting requirements. With the Trapped Profits Law (2024), the viability of forming a company must be carefully examined. In some cases, being self-employed is preferable in the early stages.
How long does it take to open a business in Israel?
Opening a dealership (Osek Patur or Osek Murshe) can be completed within a few business days. We manage the entire process and communicate with you on an ongoing basis.
What happens if I start working before opening a file?
Business activity without proper registration can result in fines and retroactive tax liabilities. It is important to open files before starting the activity, or at least simultaneously. Contact us as early as possible — we can also help regularize a retroactive situation if needed.
Is it possible to switch from one structure to another later?
Yes, it is possible to move from a sole proprietorship to a company, or vice versa — but the transition involves tax implications and may be complex. It is better to plan correctly from the outset, which is why the initial consultation is so important. If a structure already exists and a change is being considered, we assist in analyzing the feasibility.
