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Liability company
limited - Hevra Baam
A company in Israel - (Hevra Baam) is a limited liability company registered with the Israeli Chamber of Commerce.
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Ossek Patour, Ossek Mourché, Hevra Baam
Osek Patur
Ossek Patour is a VAT-exempt status for small businesses.
Low costs, but very limited turnover
More about ossek patour >>
Ossek mourche
In Israel, an Ossek Mourche is a sole proprietorship subject to VAT and standard tax regulations.
Find out more about ossek mourché >> (in French)
Hevra Baam
In Israel, an LTD (Limited) company is the equivalent of a limited liability company. It protects the personal assets of shareholders against the debts of the company.
Find out more about hevra baam>>
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Osek Patur
Owner managed business (small)
✅ No VAT payable
❌ No VAT to recover
✅ Light administrative structure
✅ Limited management fee
❌ Limited to 100K ILS per year of sales
❌ Status prohibited for certain professions
❌ Direct liability
✅ Ability to hire staff
Osek Murshe
Self-employed
contractor (with VAT)
❌ VAT payable
✅ Recoverable VAT
✅ No AC limitation
❌ Direct liability
✅ Ability to hire staff
Chevra Ba'am (Corporation)
Limited Company
LLC
❌ VAT payable
✅ Recoverable VAT
✅ No AC limitation
✅ Limited liability
✅ Ability to hire staff
✅ Possibility of having associates
❌ Higher management fees
❌ More cumbersome administrative structure
✅ More attractive for tax purposes if +500K ILS sales / year
Company in Israel - Hevra Baam, definition of the legal structure :
A company in Israel - (Hevra Baam) is a limited liability company registered with the Israeli Chamber of Commerce.
Before moving on to the strictly technical part of opening the structureIt is important to understand that the primary legal interest in setting up a company is to create a "legal separation" between the personal assets of the shareholders and the assets/liabilities of the company itself.
So, in addition to the various tax and commercial advantages we'll discuss below, the main aim of a limited liability company is to protect its shareholders in terms of liability.
Except in exceptional cases, a company can only be held liable up to the amount of its total assets. This means that the "screen" separating shareholders from the company itself can never be removed.
Legal opening of a company in Israel :
There are several steps to opening a company in Israel - Hevra Baam:
Step 1: Registration & company creation.
The body responsible for regulating the registration and establishment of a Hevra Baam is the Chamber of Commerce. רשם החברות.
It's good to know that the company cannot act as a legal entity until the Chamber of Commerce has approved the actual opening.
Here are a few important legal points to bear in mind when setting up a business:
1. One person is enough to create a company.
2. The founder of the company may also act as shareholder and director of the company.
3. The company name can be whatever the shareholders want it to be, as long as it is not the name of another existing company, a brand name, or a name that is likely to mislead and confuse the public.
4. Registering your company with the Chamber of Commerce requires a number of documents and procedures that must be scrupulously followed down to the last detail.
5. When setting up a new company, it's essential to get the right support, whether for drafting the company's articles of association, allocating shares to each shareholder, or setting up the company's various bodies. (Board of Directors, Chairman and CEO, Legal Administrator).
Step 2: Opening the company's bank account.
Once the company has been registered with the Chamber of Commerce, a bank account must be opened in the company's name.
Step 3: Register with the tax authorities.
Once the company has been registered with the Chamber of Commerce, and the bank account opening certificate has been received, the company must be registered with the various Israeli tax authorities.
Several documents are required to register the company with the Israeli tax authorities.
It's essential that you are accompanied by a firm of chartered accountants to ensure that the opening of your business is carried out properly and in accordance with Israeli law.
Balance sheet and annual declaration :
The company must submit an annual balance sheet, audited by a chartered accountant. This balance sheet presents the company's economic situation on the day of the annual declaration.
Tax and social security obligations :
As mentioned above, the company benefits from lower tax charges than the self-employed.
Here is a brief overview of the various tax obligations of an Israeli company:
1. It must declare its sales to the VAT (maam) and mas ahnassa (israeli tax office)
2. The company is subject to corporate taxation in Israel, Mas Havarot - מס חברות. It's important to point out that corporate income tax is currently 23% (as of January 1, 2021).
3. It can reclaim the VAT paid.
4. It may have employees, to whom it will pay a salary and declare them in accordance with Israeli law.
Summary of the main benefits of Hevra Baam.
1. From a tax point of view, the company will have to pay corporation tax. This tax is low (23% for the year 2021) and represents an enormous advantage. By way of comparison, a self-employed person can see his tax rate rise to over 50%.
2. The company pays no social security contributions - Bitouah Léoumi. The company's profits are only taxed via corporate income tax. They can then be paid out as dividends.
3. From a credibility point of view, being registered as a company allows you to obtain better financial conditions. Banking institutions and other sources of investment will be reassured.
4. Finally, from a commercial negotiation point of view, you can often obtain advantageous conditions from your suppliers by registering under a Hevra Baam structure.
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