Advantages of Establishing an Israeli Company
Establishing an Israeli company is complicated. The Israeli Corporations Authority is in charge of Israeli company law and enforces a number of regulations. In this article, Advocate Michael Decker from our Israeli law office provides some basic information about the advantages and complications involved in establishing an Israeli company.
A few advantages to establishing an Israeli company
1 – Limitation of Liability
The primary benefit of establishing a Limited Liability Company (LLC) is, as the name suggests, a limitation of liability. This means a company’s shareholders cannot incur a liability that exceeds the value of their shares. Thus, if the company is in debt, creditors cannot claim reimbursement from shareholders, offering shareholders the necessary security to carry out their professional activity without fear that their personal assets will be at risk. On the other hand, in certain extreme cases, such as when the risk is taken by an unwise actor or a premeditated action by the shareholders in order to harm the interests of the creditors, the law allows the court to withdraw this security and use the shareholders’ assets to reimburse some or all of the debts owed to the creditors.
2 – An Independent Legal Entity
As an independent legal entity, the company has rights and duties and is authorized to carry out numerous legal and financial operations. These include the following:
-Signing a contract
-Registering as the owner of a real estate property in the land registry cadastre (known as “tabu” in Israel)
-Carrying out commercial transactions
-Opening a bank account
If something happens to the company owners, including bankruptcy or even passing away, the company can continue to operate without suffering any legal consequences. As a separate legal entity, the company has an unlimited life and exists independently.
3 – A More Flexible Functional Structure
The shareholders of an Israeli company are free to choose the financial and functional structure of their company. They can thus distribute their shares and their respective rights according to the terms and conditions they agree to. The division can implemented before the company is even created. These are incorporated into the company’s bylaws or under a cooperation agreement.
4 – The Fees Involved
Each company is subject to charges which must be paid for its workers to the National Insurance Fund (Bituah Leumi) and to the tax authorities. The percentage of these social security contributions is set according to the amount of taxable income collected by the company. Although the tax legislation is very dynamic, and a case-by-case study is necessary, the creation of an LLC is likely to be the ideal structure to save social charges and taxes.
In addition, the company must pay the annual fee to the Trade and Companies Registry. As of 2018, the fee is 1,488 NIS (companies wishing to pay in the first two months of the year benefit from a discount).
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If you are interested in establishing an Israeli company and seek legal assistance, feel free to contact us. For more information on other articles we have written on Israeli company law, see our series of articles on our website.