Israel is the best place to invest because of its people. There is no other place with such high quality people, with the motivation an abilities that Israelis have.
One of the biggest objections people have about moving to Israel is the parnasah issue. It is a serious concern, but I don’t see why it is more of a concern in Israel that it is anywhere else in the world.
Table of Contents
Getting Started
Everything begins with an idea. Every business, product, service, and institution all started with an idea someone had. Successful businesses usually started off with good ideas. Failed businesses started with good ideas that weren’t executed correctly.
Many people have amazing ideas for starting a business, however, they don’t have the courage to starting it in special in Israel when you are a new immigrant and you don’t have knowledge of laws or rules in Israel.
The main things you need to make before starting your business in Israel are:
Selecting the business idea
Checking suitability.
Studying feasibility.
Preparing a business plan.
The business plan:
So to get started, create your own simple, one-page business plan that is a high-level overview of the small business you’re about to start.
Define your vision. What will be the end result of your business?
Define your mission. Different to a vision, your mission should explain the reason your company exists.
Define your objectives. What are you going to do? what are your goals?
Outline your basic strategies. How are you going to achieve the objectives you just bulleted?
Write a simple action plan . Write a business plan to establish a business focus, secure funding, and attract investors. Common challenges of writing a business plan include identifying financial, demographics, and workable goals.
Some entrepreneurs struggle with creating a business plan that is concise, interesting, and informative enough to prove that their business idea is viable.
You can simplify your business planning process by doing your research, speaking with experts and peers, and conferring with a business consultant in Israel.
Here in this article, you’ll find 5 steps to start your small business in Israel.
5 steps to start small business in Israel
1. Institutions of business consultant for Olim Chadashim
If you are opening a business in Israel, no matter, if it is small or big. it is highly recommended that you contact the institutions that provide help services to new Olim (up to 10 years in Israel). they are free of charge and sponsored by the Ministry of Klita. Some of their services include:
- One-on-one counseling, providing assistance in the beginning stages. Counselors will help you put together a business plan.
- Courses about opening, running, and financing a business in Israel. Hebrew-language courses are run frequently; English-language courses are run less frequently in Jerusalem, Ramat Gan, Haifa, Beit Shemesh, and Raanana. These courses are highly subsidized.
- Information and guidance about securing business loans.
- Mentorship program that offers you a comprehensive package of personally customized business mentorship with highly experienced professionals who know the Israeli market. New Olim (up to 10 years in Israel) are entitled to up to 20 hours of free business mentoring with a recognized business coach, subsidized by Misrad Haklita. It is important for your consultant how many hours you’ll receive and how these hours will be distributed.
- Entrepreneurship courses or how to grow your business at a low cost, whose part of the payment is subsidized by the government, by the Ministry of Finance.
Some institutions are Mati, Maof, Keren Shemesh.
Mati and Maof are in different cities of Israel as Jerusalem, Netania, Beer Sheva, and other cities, and Keren Shemesh is localized in Beit Shemesh.
These institutions can find mentors in different languages: English, Spanish, and Hebrew.
2. Knowing Israeli Culture
No matter the niche of your business, it is essential to know the Israeli Culture, because Business culture in Israel is diverse. However, Israelis are generally direct, assertive, motivated, and ambitious. Their schedules are busy, and business is usually informal and fast-paced. Israelis are also known as aggressive negotiators, though they often like to mix business with pleasure.
Especially if you came from countries like USA, Canada, and South America can be shocking if you compare with the business culture your natal country.
3.Choice the kind of business you'll open
There are several ways to open your business here in Israel. However, in this article, we will mainly refer to two of them.
Osek Patur.
Osek Murche.
Company.
In this article, we are not going to refer to companies or institutions, or non-profit organizations.
Osek Patur
It is the equivalent of a sole trader or self-employed. It’s an individual who opens a business without forming a corporate entity. This type of business is suitable when the financial turnover of the business is small (no more than 100,491 NIS a year.
If you exceed the annual limit the following year, you will have to transform your business to an Esek Murshah
The Israeli Tax Office has given small businesses ( Osek Patur) the benefits of simpler administration (and as a result also lower professional fees) by simplifying the registration process and the annual reporting once the business has been established.
An Osek Patur must open a tax file and register with the Ma’am Office as a “VAT-exempt” business.
Also, Osek Patur should be registered in Bituach Leumi (National Insurance), Osek Patur (with no other income), and working 10 hours per week, with a monthly income of 3,000 ILS per month might not pay a single shekel in Income Tax or Bituach Leumi contributions.
if the working hours are equal or mayor to 20 hours per week the income is 5000 Shekels or more, we advise talking with an account, so, they will guide you on how to proceed.
Osek Murshe
In its turn, this type of business is obliged to pay VAT from all of its trade transactions. But at the same time, the osek murshe has the right to refund VAT on incoming transactions necessary for the operation of the enterprise (purchase of raw materials, rent of premises, equipment, etc.). Thus, it is possible to refund a portion of the investment.
It is important to clarify that some professionals cannot register like osek patur, they must be registered as an osek murshe.
For example professions such as architect, doctor, veterinarian, lawyer, real estate broker, etc.
If your annual turnover of the business exceeds 100000 shekels, you need to be registered as Osek Murshe, and if it is less to this annual quantity , so your business is Osek Patur.
If your business is Osek Murshe , you will need to make VAT returns every month or two months (depending on the turnover).
In this case, we advise you to hire the services of an accountant.
4. Procedure for registration of Osek Patur or Osek Murshe
All forms of doing business are registered by starting a folder in three instances:
In the Office of Value Added Tax (Ma’am), a legal entity receives a certificate and a registration number and also gets an opportunity to procure and issue receipts. it applies in both cases.
In the Income Tax Administration (Mas Akhnasa), the amount of the tax rate, the frequency, and scope of reporting, the method of accounting are established.
In the National Insurance Service (Bituach Leumi) the amount of insurance contributions is determined, which in the future will allow the entrepreneur and his employees to apply for pensions, various benefits, and other social guarantees.
If you have doubts about how the procedure for registration of your small business, consult with an accountant.
5. Open a business bank account
Having a separate account for your business is both commonplace and makes financial sense. If you are self-employed, you can choose whether to use your personal bank account or not. However, we advised you to open a bank account different for your business, because you can organize better your finance and not mix the income and expenses of your business with your personal finance.
Consider separating your personal and business funds to:
- Keep your finances in tip-top shape
- Legitimize your business
- Have organized accounting records
- Make it easier to file your business tax return
- Help you avoid overspending
- Avoid missing growth opportunities
- Create a clear audit trail
- Project cash flow
- Reconcile bank statements
Furthermore, find the bank that can provide your business with the best benefits, loans, credits, and others.
Many self- employees open bank business account in the same bank where they have a personal account.
What do I need to open a business bank account?
Generally, you can choose between opening the account in person or online. But, you must open your small business bank account in person if you are in one of the following industries:
- Telemarketing
- Precious metals
- Gambling
- Government
In these cases or in any other case, we advise opening the business account in person.
You must bring to the bank branch you choose to open the business account the following:
- Your Teudat Zehut and Teudat Oleh (if you don’t have one yet your Teudat Oleh should suffice).
- If your business is Osek Patur or Osek Murshe, must bring your document or certificate your registered your business.
- You will be signing forms confirming that you declare taxes in your country of origin and all the money in your account now and in the future is yours (tax forms and anti-money laundering). All account holders must have their foreign tax identification numbers / social security numbers.
- US citizens will be asked to complete a W-9 form.
We advise you to call the bank branch of your preference, to receive the information necessary to open your business account.
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