Legal Tips for Opening a Business in Israel: A Complete Guide

Setting up a business in Israel has great potential, but requires careful legal planning to comply with Israeli law. This guide provides comprehensive legal advice on setting up a company in Israel, from company registration to taxation and tax compliance. In addition, knowledge of the perspective that a Bankruptcy attorney in Israel can prove invaluable in helping to protect your business from future tax damages.

Why do business in Israel?

Israel’s other name is “Startup Nation.” There is a very vibrant entrepreneurial ecosystem supported by the government, high-tech sectors, and an open market economy. Here are some of the reasons why almost all investors and entrepreneurs prefer to move to Israel:

• An innovation hub: Israel is full of innovative ideas and products in the fields of technology, cybersecurity and biotechnology.
• Government Encouragement: The Israeli government offers tax breaks, financial aid, and support for startups as well as foreign investors.
• Strategic location: Israel has direct access to markets in the Middle East, North America and Europe, which positions it as a strategic business location.
• High Qualification Skills: The presence of prestigious academic institutions and specialized experts provides companies with direct access to highly qualified professionals.

However, despite these advantages, a detailed understanding of Israeli commercial law and financial standards is essential to navigate this industry and prevent possible difficulties when establishing a company in Israel.

Choosing the appropriate legal form

Establishing a business in Israel requires making the right choice of legal structure, which is a crucial moment. Here are the main options:

• Joint Stock Company (Plc): ideal for large companies wishing to raise funds on the public market.
• Partnership: A standard commercial contract between two or more entities, the purpose of which is to share profits, losses, and liabilities.
• Sole proprietorship: an individual who owns and manages a business, thus assuming all the responsibilities that come with it.

Each legal form has unique tax and legal consequences, which highlights the need for the expertise of legal advisors to make an informed decision when establishing a business in Israel.

Business registration procedure

You have made the right business structure decision, follow these instructions to legally register your business:

1. Business Name Reservation: Submit three name options to the Israeli Registrar of Companies for approval.

2. Preparation of the document:

• Articles of Association: Provide a description of the company’s objectives, management, and share capital distribution.
• Shareholder Declaration: Shareholders’ commitment to comply with the law.
• Directors’ Declaration: The nominee directors have signed the declaration.

3. Filing with the Business Registry: Send the registration settlement (approximately NIS 2,645 in 2021).

4. Issuance of Certificate of Incorporation: Upon approval, your company is formed.

Foreign business owners may need to provide additional notarized documents, including passport copies and financial statements, to finalize registration. It can be very beneficial to hire an expert bankruptcy lawyer in Israel from the first step in order to deepen your knowledge about financial risk management.

Tax regime and responsiveness in tax matters

It is a good idea to take a detailed look at the Israeli tax system to ensure compliance:

• Corporate taxation: In Israel, companies are subject to a corporate tax rate of 25%.
• Annual charges: Companies pay an annual fee (approximately NIS 1,500).
• VAT (Value Added Tax): The standard VAT rate is 17%, and businesses are required to register for VAT if it is mandatory.
• Financial reporting: Businesses are required to report their financial statements on income, expenses, and tax liabilities annually.

A local accountant can offer tax compliance services while also benefiting from tax benefits for businesses. For companies facing financial difficulties, a Bankruptcy lawyer in Israel can give professional advice on debt restructuring and financial recovery solutions.

Opening a Business Bank Account

Israeli businesses need a local bank account to operate smoothly. The process typically includes the following:

• Presentation of the document certifying the registration of the company: proof provided by the Registrar of Companies.
• Control of authorized signatories: verification of persons with the authority to give their approval to financial transactions.
• Provision of the Director’s Identification Document: a notarized version of the Director’s passport.
• Delivery of company documents: certified versions of the company charter and articles of incorporation.
• Anti-Money Laundering Compliance: Filing of required forms to ensure compliance with standards.

Foreign companies are also subject to stricter inspection, so proper documentation will make it easier to establish an account.

Bankruptcy and Financial Security Law

Although everyone agrees on the need to adopt measures to improve the profitability of the company, it is crucial to identify the factors that have led to this difficult financial situation:

• Legal Services: Consulting with an expert bankruptcy lawyer in Israel can support the company in its insolvency management, reorganization, and offer legal assistance.
• Restructuring of financing systems: The majority of regulations allow companies in crisis to meet their financial commitments over a defined period of time, to prevent liquidation proceedings.

It is best to take a proactive approach by maintaining accurate accounting and rigorous records to consult with a lawyer, to ensure that your business will not be able to.

Hiring Employees and Labor Legislation

If the recruitment of new employees is under consideration, you will need to comply with Israeli labor laws which include:

• Compliance with the minimum wage: Employees are entitled to receive a salary at least equivalent to the national minimum wage from their employer.
• Drafted employment contracts: Employment contracts should be drawn up, stating job descriptions, salary, and benefits.
• Employer contributions to employee benefits: It is mandatory for employers to make a contribution to their employees’ social benefits, including health insurance, pensions, and termination benefits.
• Rules regarding working hours and overtime: In Israel, the typical working week runs from Sunday to Thursday, totaling 42 hours per week.

Compliance with labor laws minimizes legal liabilities and helps ensure a productive and safe workforce.

Protection of Intellectual Property Rights

The protection of their digital assets is what companies are required to do, in the context of a subset of the economy, which would be represented here by the digital, innovation and media sector. It exists in a legal way:

• Registration of names: Done at the very moment of acquisition of inventions or innovations.
• It secures logos: sales identities, economic names and registered trademarks.
• Intellectual use rights: Preservation of authentic works such as books and computer software, or multimedia components.
• The initial access registered work of art gives you a defense against legal disputes and protection against competition, also attached to the trademark.

Conclusion

Starting an Israeli business requires careful decisions and compliance with legal and financial laws. Legal advice to open an Israeli business or advice from an experienced Israeli bankruptcy lawyer may be necessary. Professional advice from Israeli lawyers ensures the smooth running of the business and its long-term success.

Need answers to your questions? Need professional advice? Send a message below or email our experts for personalized legal advice.