Israel has earned its reputation as the “Startup Nation” for good reason. With a thriving tech ecosystem, access to international markets, and government support for entrepreneurs, it’s an attractive destination for business owners. Here’s a practical guide to launching your business in Israel.
Step 1: Choose Your Business Structure
Israel offers several business entity options:
Sole Proprietorship (Osek Patur/Osek Murshe) – Simplest form, suitable for freelancers and small businesses. Low setup costs, but you’re personally liable for debts.
Limited Liability Company (Hevra Baam/Ltd.) – Most common for serious businesses. Protects personal assets, more credible with clients, required for raising investment. Minimum one shareholder and one director needed.
Partnership – Similar to sole proprietorship but with multiple owners. Each partner is personally liable.
For most international entrepreneurs, an Ltd. company is the recommended choice. It costs around ₪2,500-5,000 ($700-1,400) to establish and provides legal protection.
Step 2: Register Your Business
The process is surprisingly straightforward:
- Reserve your company name through the Registrar of Companies website. Check availability first – names must be unique and in Hebrew.
- Prepare required documents: Articles of Association, shareholder details, director information, registered office address in Israel.
- Submit registration online or through a lawyer. Processing takes 3-7 business days.
- Receive your company number – your official business identification.
Practical tip: Hire a local lawyer or accountant for the first registration. They know the system and can save you weeks of confusion. Cost: ₪3,000-7,000 ($850-2,000).
Step 3: Tax Registration
Within 30 days of starting operations, register with the Israel Tax Authority for:
- VAT (Ma’am) – Currently 17%. Required if annual turnover exceeds ₪100,000 ($28,000), optional below that.
- Income Tax – Corporate tax is 23% (lower rates for preferred enterprises).
- National Insurance – Mandatory social security payments.
Register online at the Tax Authority website or in person at a tax office. Bring your company registration documents and ID.
Step 4: Open a Business Bank Account
Israeli banks require substantial documentation:
- Company registration certificate
- Articles of Association
- ID/passport of directors and shareholders
- Proof of address for the company
- Business plan (sometimes)
Popular banks for businesses: Bank Hapoalim, Bank Leumi, Discount Bank. Meeting setup takes 1-2 weeks, account opening another 1-2 weeks. Be patient – Israeli banking moves slowly.
Step 5: Obtain Necessary Licenses
Depending on your business type, you may need:
- Business license (Rishayon Isk) from local municipality – mandatory for physical locations
- Professional licenses for regulated professions (medicine, law, food service, etc.)
- Import licenses if bringing goods into Israel
Check with your local municipality and relevant government ministries for specific requirements.
Step 6: Understand Employment Laws
If hiring employees:
- Minimum wage: ₪5,880/month ($1,650) as of 2026
- Mandatory benefits: pension, vacation days, sick leave, severance pay
- National Insurance contributions for each employee
- Monthly salary reports to tax authority
Israeli labor laws strongly favor employees. Budget 50% above salary for total employment costs (taxes, insurance, benefits).
Step 7: Build Your Market Presence
Israel’s business culture has unique characteristics:
Direct communication – Israelis appreciate straightforwardness. No need for excessive formality.
Network heavily – Business relationships matter enormously. Attend industry events, join professional organizations.
Leverage government support – Israel Innovation Authority offers grants for R&D, innovation, and international expansion.
Think global from day one – Israel’s domestic market is small (9 million people). Successful companies like bemazal.com, working on the international market, understand this principle. Building a business that can scale beyond Israel’s borders is crucial for long-term success.
Practical Costs to Budget
Realistic first-year costs for a small business:
- Company registration: ₪5,000-10,000 ($1,400-2,800)
- Monthly accountant: ₪2,000-5,000 ($560-1,400)
- Office space (Tel Aviv): ₪8,000-15,000/month ($2,200-4,200)
- Annual lawyer fees: ₪10,000-20,000 ($2,800-5,600)
- Insurance: ₪3,000-8,000/year ($850-2,200)
Common Mistakes to Avoid
Underestimating bureaucracy – Israel loves paperwork. Allow extra time for everything.
Ignoring tax deadlines – Late filing penalties are harsh. Set reminders.
Not consulting professionals – Trying to DIY complex tax or legal issues costs more in the long run.
Assuming Hebrew isn’t necessary – While many speak English, government forms and official communication are in Hebrew. Have a Hebrew speaker on your team.
Final Thoughts
Starting a business in Israel requires patience, proper planning, and local expertise. The bureaucracy can be frustrating, but the ecosystem is supportive once you’re established. Israel offers access to talented workforce, proximity to European and Middle Eastern markets, and a culture that celebrates entrepreneurship.
Take it step by step, invest in good professional advisors, and build your network. With the right approach, Israel can be an excellent base for your business venture.
