Which Business Type Should You Choose?

Building a business in Israel is a very personal decision. Luckily, it’s an amazing country to work in with many Israel business types that will suit your needs. In a global economy, Israel ranks as number 35 out of 190 economies around the world, according to the World’s Bank Ease of Doing Business Survey in 2020. That’s great news for starting your own undertaking this year. 

The first thing you have to do is figure out the types of businesses in Israel you should choose. There are many different Israel business types to go with that once you learn what they are and a little bit more about how they operate, then you’ll be able to make a more informed decision. The next thing you know is that you’ll be on the road to success looking to run your operation with offices in Israel from the Jerusalem Business Center that’s open 24 hours a day. 

Let’s look into some details about each of the Israel business types, so that you can get started creating your dream company today. 

The Two Main Types of Businesses to Register

In order to start a business in Israel, you must register your company with the Israel Ministry of Foreign Affairs. They are the government entity that sets forth all the rules and regulations that a business must follow in the country. You must complete all the forms with their registrar, pay an attorney, and a registration fee. Then you are issued a Certificate of Incorporation for your business. 

Most people register their company as either an individual entrepreneur (Osek Patur) or a limited liability company (Chevra Baam). Which one you choose will have an impact on the amount of taxes you pay each month in Israel. 

The Osek Patur 

Picking the Osek Patur style of business means that you are an individual entrepreneur who has the sole responsibility for your company. In other words, you are a sole proprietor. Some people who choose this type of business have considered themselves “self-employed” doing something as a side gig for years and now want to officially commit to it full-time. 

Having this business type will allow you to register as VAT-exempt, which can help you avoid some of the taxes that larger companies need to pay. Your earned annual income must not go over a certain amount that is set by the government each year. Choose this type of company if you plan on selling a set amount of goods or services to individuals. 

The Chevra Baam

In looking at how a Chevra Baam works, it helps to limit the personal liability of its owners. You set up a charter on how it’s going to work, but it also needs to include the word, “Limited” as part of the company’s legal name when you register it. 

This style of company is for you when you have a significant number of investors, multiple owners or partners, and will need to hire an accountant to handle all the bookkeeping correctly. As a larger company, the Chevra Baam is for someone looking to start a limited liability corporation that will probably have quite a few employees. 

A Few Other Types 

There are some other Israel business types to consider. One of those is the Osek Morshe, which is great for a first-time entrepreneur starting a small company. Many people start this style of company with limited starter capital. It does help you incorporate your business, registering it correctly, and starting to pay the right amount of taxes. 

If you are more interested in starting a Non-Profit Organization (NPO), then you’ll run a company with the goal of helping people based mainly on donations. They fall under a totally different category of taxes and regulations to follow. 

One last type to consider is the cooperative, which is called a kibbutz or moshav. This style of business usually comes from a smaller town that is looking to sell something in the agricultural sector. For example, let’s say you own a beekeeping farm and want to sell your honey, then a kibbutz might be right for you. Here’s a fun fact. The first kibbutz was started in 1909 in Israel, so they have a long history of beneficial community in the country. 

The Jerusalem Business Center Wants to Help You Succeed 

No matter what business type you start in Israel, the Jerusalem Business Center wants to be your go-to office rental space with flexible packages available. Congrats on making the decision of building a business in Israel. Subscribe to our newsletter to learn more about how the different business types operate and how to make the JBC work for your organization.