Is a Registered Business Owner Required to Have an Accountant?

What exactly is a licensed business owner and what does the law require of them?

If you are self-employed and registered with the Tax Authority as a "licensed business owner" — this means your business has crossed a certain threshold of income or complexity. Unlike an exempt business owner who can manage with basic record-keeping obligations, a licensed business owner is subject to far more stringent reporting requirements.

In short, the law is clear: you must maintain proper and regular books of all your transactions, and submit an annual report to the Tax Authority by a set deadline (usually within three months of the end of the tax year). This report must contain accurate details of income, expenses, debtors and creditors, and any other relevant financial information.

This is not optional. It is a legal obligation. If you fail to comply — you may face penalties, interest, and in serious cases, even a Tax Authority investigation.

Is it mandatory to hire an accountant?

Here is where it gets interesting: the law does not say "you must hire an accountant". It says "you must maintain books and reports". These are not quite the same thing.

Theoretically, you can do it yourself. You can keep books yourself, use accounting software, and even submit an annual report to the Tax Authority on your own. There is no section in the law that says "a licensed business owner must hire an accountant".

But — and there is a big "but" here — most business owners we work with come to us precisely because they tried to do it themselves, made mistakes, or simply realized that the time they spent was not worth the money they saved. And there are also business owners who completely ignored these obligations and then ran into trouble when the Tax Authority contacted them.

Why should you work with us?

If you are a licensed business owner, accounting is not an easy task. You need to track every receipt, every expense, every advance tax payment, every change in liabilities — and everything must be aligned with Tax Authority requirements and VAT regulations if you are also liable for it.

When we handle the accounts of a licensed business owner, we do not just keep books. We track submission deadlines, calculate advance tax payments correctly, identify expenses you can deduct from taxable profit, and ensure your annual report meets all Tax Authority requirements.

It also gives you peace of mind. You know that someone who understands the law is on top of it, not you alone.

What Exactly Needs to Be Maintained and Reported?

A licensed business owner must maintain books that include:

• Income register — every income you received, when, and who paid it.
• Expense register — every business-related expense, with a receipt or invoice.
• Accounts receivable and payable balances — if you extend credit to customers or purchase on credit from suppliers.
• Assets and liabilities — all property owned for business purposes, and any loans or debts you owe.
• Annual report — a summary of everything, submitted to the tax authority within three months of the end of the tax year.

Additionally, if you are liable for VAT payment, you must also submit periodic VAT reports of transactions (monthly or quarterly, depending on business volume).

All of this must be documented, organized, and supported by receipts or invoices that match your records. If the tax authority audits your books and finds that the records do not match the receipts — there could be a problem.

What Happens If You Don't Meet Your Obligations?

If you are a licensed business owner and do not maintain books as required, or do not submit an annual report, the tax authority can:

• Impose a penalty for non-filing or late filing.
• Impose interest on taxes not paid on time.
• Audit your books itself and estimate income at its discretion if it finds your records unreliable.
• In serious circumstances, refer the matter to police for investigation of tax fraud.

Penalties and interest can be substantial. Therefore, even if you think you can manage on your own, it's worth reconsidering.

Common Mistakes Licensed Business Operators Make

1. Keeping Receipts Only, Without Organized Books
Many business operators think it is sufficient to keep a receipt for every transaction. It is not enough. The tax authority requires organized books that show the flow of money over time. A single receipt is insufficient.

2. Recording Expenses Without Receipts
You cannot deduct an expense from profit if you do not have a receipt or invoice proving it. The tax authority will not accept "I remember buying gas."

3. Delay in Filing the Annual Report
The deadline for filing the annual report is strict. If you are late, there is an immediate penalty. People do not always understand that the delay is a problem from day one.

4. Failure to Update VAT or Advance Tax Payments
If you are liable for VAT or advance tax payments, you must report and pay each month or quarter. People forget this, and then at the end of the year they discover they owe a large amount.

5. Mixing Personal Money with Business Money
If you pay personal expenses from the business account, or withdraw money from the business without documenting it as a capital contribution or withdrawal—this creates confusion in the books and can raise red flags in an audit.

When Should You Really Contact an Accountant?

If you are a licensed business owner, actually any moment is a good time. But there are cases where it becomes much more urgent:

• You have just started your business — this is the best time to set up proper books from the beginning, without accumulating years of confusion.
• The annual report deadline is approaching — if you are unsure whether your books are ready, it is time to call.
• The Tax Authority has contacted you — if you have received an audit notice or inquiry from the Tax Authority, do not wait. You need a professional response.
• Your business has grown or changed — if your income has increased significantly, or you have started working with VAT, or you have added employees — this changes your obligations.
• You are uncertain yourself — if you have any doubt whether you are meeting your legal obligations, that is already reason enough.

Ben Or Kook offers a free initial consultation for licensed business owners. In this meeting, we understand your situation, check whether you are meeting your legal obligations, and suggest a path forward. If you are in Petah Tikva or Ramat Gan, we can also meet in person. If you are further away, we work via Zoom or telephone.