'All the Tips You Need for Registering Your New Company in 2019'

Ron Hadar, CEO of Ettorney

In the next short article, we will review the important things & tips for all entrepreneurs that want to incorporate their venture and make it a real business in 2019. We will answer these questions:

1.       How can you save 1,400 NIS in the registrar of company’s fees?
2.       How can you expedite the registration process due to the registrar beginning of the year work load?
3.       How can you minimize the legal and accounting expenses in regards to company incorporation?
4.       What are the benefits of incorporating an LTD company in Israel?
5.       How to create minimum bureaucracy and maximum efficiency in order to save time and headaches? 

First, these are the main reasons to incorporate an LTD company:

1.       Limited liability – an LTD company is a separate legal entity from its owners:  when a person decides to incorporate an LTD company, he as an individual is separated from his company and business activity. This means that if there will be any claims/lawsuits against the company or in the worst case even a liquidation event or bankruptcy process, the creditors will not be able to claim their debt from the individual but rather from the company itself that is limited to its allocated shares.

2.       Tax – when an individual regulates his business activity in the form the “Osek Murshe” or “Osek Patur”, he is subject to certain tax regulation according to the tax brackets that are derived from its income and profits. There are income levels in which it is no longer worth for an individual to practice his business activity as “Osek patur/Murshe” (can get up to 50% income tax) when the company’s tax is much lower – will be only 23% in 2019.

3.       IP – If your company is developing software - this is intellectual property that the company needs to own as an asset and not the individual’s shareholders.

4.       Investors – if you are about to raise funds for your venture you will need to incorporate in order to allocate shares for your investors in return for them injecting capital.

In Israel more than 17,000 companies are registered annually. The authority is called “The registrar of companies” (Rasham Ha-cha-va-rot), a unit in the department of justice.

Where do we begin?

Step 1 – Register your Company and Get a Certificate of Incorporation

In the first step you will need to choose 3 alternative names for your company. We don’t know for sure which name will be accepted by the registrar of companies (if there are identical or similar names already registered) and we don’t want to get a refusal for the registrar application. The next thing you will need to do is to provide a registered address of the company and to define who are the company’s shareholders and what is the holding percentage of shares. You also should register the company’s directors. Please notice that a director doesn’t necessarily have to be a shareholder although that is the case in most early stage startups.
After signing the company’s article of association and shareholders and directors’ declarations followd by an attorney’s signature, the application is sent online and you will get a certificate between a few hours to a few business days. 

Step 2 – Opening our Bank Account

After you registered your company the next step is to open a bank account. Opening a bank account for an LTD is not as simple as opening a bank account for an individual. First you will need to address the specific branch of the bank you want to open the account in order to provide you with the set of documents and instructions for a lawyer to prepare and sign. You will also need to provide the bank the article of association and certificate of incorporation both of which should be certified copies by a lawyer. The set of documents will include among others, a protocol of authorized signature rights in the company, protocol for a credit card etc. (between 5-10 docs total). Please note – in order to open a bank account for an LTD you will need to bring with you to the branch a company’s stamp with its name and number as shown in the certificate of incorporation.

Step 3 – Opening your Tax Files in the Authorities

The last step of the process is opening your tax files with the IRS, VAT and “Bituach Leumi”. After your company is registered and you opened your bank account, you should address the Tax and VAT authorities in order to open your files. You can do that online as well with the help of an accountant in less than 48 hours– no need to wait in long lines in the tax authority office.

Simplify the process online: 

In conclusion, these days most of the company incorporation process can be done online and in a few business days. If you have all the information in advance you can have everything ready in order to operate your business in the beginning of 2019 – inject funds from investors, register your IP on the new company name, get paid from customers and generate invoices and sign contracts on behalf of your company.

Important Tips: 

Company’s Name – During the process of registering your company you can check online whether your company’s name is available in order to prevent any refusal from the register of companies (the system is connected to the registrar of company’s database). Please notice that the data available doesn’t cover all the possibilities rather it gives you an idea.

Bank Account – Before you decide at which bank you would like to open your company’s account please conduct a market research. Check all the terms and conditions / offerings that a bank gives you and compare. In Israel, you can always negotiate on your terms and conditions.  The bank even expects it and will start with a much higher offer. Once you decide with which bank you will continue, ask the specific branch to provide you with all the documents and instructions you will need in order to open the account (you can do this via Email). Another thing that’s important not to forget is to bring with you your company’s stamp to the branch.

Choose your Accountant (CPA) – an LTD must have an accountant in order to review and handle all the financial aspects of the company. You need to know you can trust your accountant mainly because he knows everything about your business and can also give you valuable tax advice. Your accountant must submit all the reports to the IRS/VAT and a Balance sheet and audit report in the end of the fiscal year. The price range of accountant services for an LTD is between 650 NIS – to several thousand NIS depends on the income, revenue and other criteria. 

Annual Report to the Registrar of Companies – Besides the reports to the IRS/VAT authorities, it is mandatory to submit an annual report to the registrar of companies. Unlike an annual report of a CPA it’s a very simple and not expensive procedure that a lawyer can sign and transmit online to registrar of companies.

Saving time in registration process on January 2019 alongside saving money in annual fees:

When you want to register a company in Israel you need to pay a fee, “Agra” to the registrar. In 2018 the fee is 2614 NIS, and if you register your company online you need to pay only 2150 NIS (a substantial discount for early stage entrepreneurs). Please note – the fee is a registration fee + an annual calendar fee, which means it is only valid for the calendar year it was paid on. For example, if you register your company on December 31st 2018, you will need to pay an additional fee in 2019 of 1448 NIS. Under these circumstances, many people prefer to wait with their company’s registration until the beginning of the next year (2019) and save the 1,448 NIS.

From our experience, due to an overload in the office of the registrar of companies (many people wait for the beginning of 2019 to register their companies), we highly recommend you to prepare and sign all the necessary paperwork in December and wait until January 1st to pay the fee to the register of companies and send it online. Then, not only will you save the fee but also can get the certificate of incorporation as fast as you can and prevent delays as it is first come first serve.    

Check out Ettorney here!

Ron Hadar is an entrepreneur & high-tech attorney who founded Ettorney - Israel's leading platform for online legal services. Ettorney’s mission is to make legal services accessible by creating a quick & simple experience that is both transparent and affordable. The company offer a variety of online services at fixed prices for entrepreneurs & high-tech start-ups, such as: a company incorporation package including opening of a bank account and tax files.

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