Opening a Licensed Business in Ra'anana

Why Should You Open a Licensed Business (Osek Murshe) in Raanana?

If you are self-employed in Raanana and considering opening a licensed business, you are on the right path. A licensed business is the simplest form of self-employment — not a limited company, not a partnership, but activity conducted in your personal name. Most self-employed individuals we work with at our Petach Tikva and Raanana office start this way, and for good reason — it is fast, less bureaucratic, and easier to manage.

However, do not be mistaken — opening a licensed business is not merely submitting a form to the tax authority. There are annual reports, tax advance payments, mandatory deductions for national insurance, and training funds. If you do not plan properly from the start, you will reach the end of the year with unpleasant surprises.

Ben Or Kok Accounting Firm has guided dozens of self-employed individuals in Raanana from the first moment of opening a business. We ensure that all data is correct, that you do not miss filing deadlines, and that you pay exactly what is required — no more, no less.

What is a Licensed Business and Who is it Suitable For?

A licensed business is a form of business conducted in your personal name. You are the business owner, you are liable for reports, you pay income tax and national insurance. This is not a special government ministry approval — it is simply your status as a self-employed individual reporting to the tax authority.

A licensed business is suitable for you if:

• You are self-employed in Raanana (contractor, lecturer, consultant, designer, programmer, cleaning services, repairs, etc.).
• You want to start with minimal bureaucracy — you do not need to establish a limited company.
• Your income is reasonable (not necessarily small, but you do not need a complex corporate structure).
• You are willing to report honestly to the tax authority and pay your obligations.

If you are an employee and want to earn some extra income on the side — this is also possible with a licensed business, but there are rules. If you want to establish a large startup with investments or investors — a limited company is likely the better decision.

Practical Steps to Opening a Licensed Business

Let us go through this one step at a time. Do not be alarmed — it is simpler than it appears.

1. Check with the Local Authority: If you are opening a business in Raanana that requires a license (for example, a kitchen, shop, or restaurant), contact the Engineering Department at the Raanana Municipality. In most cases of self-employed individuals (consultant, programmer, lecturer), you do not need a special license.
2. Register with the Tax Authority: You must submit Form 101 to the tax authority. This is the basic form in which you notify them that you are starting a licensed business. You can submit it online or directly.
3. Receive a Business Number: After submitting the form, the tax authority will provide you with a business number (business tax number). This is your number in the Israeli tax system.
4. Register with the National Insurance Institute: As a licensed business owner, you must register with the National Insurance Institute. They will charge you monthly national insurance payments (usually calculated based on estimated income).
5. Choose an Accountant: This is not a legal requirement, but it is essential to avoid mistakes. An accountant in Raanana or a nearby city (Ramat Gan, Petach Tikva) will help you manage reports, calculate advance payments on time, and avoid surprises at year-end.
6. Open a Business Bank Account (Optional but Recommended): This will make it easier for you to separate personal and business funds. Most banks in Israel offer licensed business accounts at reasonable fees.

What You Need to Know About Income Tax and Annual Reporting

This is the part that causes self-employed individuals anxiety. Let us make it simple.

As a licensed business owner, you pay income tax on your income. The tax is not paid in one lump sum at year-end — you pay monthly or quarterly advance payments to the tax authority. Typically, in the first year, the tax authority estimates your income independently, and some self-employed individuals pay based on this estimate. If your income is higher, you will need to increase the advance payments. If it is lower, you can request to reduce them.

At the end of each year, you must submit an annual report to the tax authority. In this report, you detail all your income, all permitted expenses (equipment, materials, rent, tools, etc.), and calculate your profit. On this profit, you pay income tax at a rate that depends on the amount of your profit.

One point that is not always clear: expenses must be documented. It is not enough to say "I bought things." You need invoices, receipts, and contracts. If you work from home, you can deduct part of your rent and electricity, but typically this is a small portion of your household expenses.

Most of our clients in Raanana who maintain annual reports with an accountant receive more accurate reports, receive tax refunds with better justification, and are less concerned about audits by the tax authorities.

Tax Prepayments and National Insurance — What Exactly Do You Need to Pay?

This is a question we receive frequently. Let us break it down.

Income Tax Prepayments: Typically, the tax authority will require you to make monthly or quarterly payments. The amount depends on your estimated income. If you estimate an income of 5,000 shekels per month, your tax will be approximately 500–800 shekels (depending on your tax rate). If you estimate an income of 10,000 shekels, it will be more.

National Insurance: This is an additional payment. As a licensed self-employed person, you pay national insurance based on your estimated income. Typically, this is approximately 12–15% of your income. If you estimate an income of 5,000 shekels, national insurance will be approximately 600–750 shekels per month.

Training Fund: If you want to be organized, you can deposit into a training fund. This is not mandatory, but it is a tax saving — deposits to the training fund are deductible from income tax.

In short: If you estimate an income of 5,000 shekels per month, expect a monthly payment of approximately 1,200–1,600 shekels (tax + national insurance). This is before your other expenses.

Common Mistakes We See All the Time

After years of supporting self-employed professionals in Raanana and the surrounding area, we see patterns. Here is what you should avoid:

• Not keeping invoices: A self-employed person who does not keep receipts or invoices eliminates themselves from the game. At the end of the year, they cannot prove expenses, and thereby they pay tax on a higher profit than reality. Keep everything — digitally or on paper.
• Forgetting to file an annual report on time: If you miss the deadline for filing an annual report, there are penalties. They are not small. Even if you do not owe taxes, you still need to file an annual report (a blank report).
• Not updating tax prepayments: If your income increases significantly, and your prepayments do not, you will reach the end of the year with a large debt to the tax authority. Check every six months if you need to increase your prepayments.
• Mixing personal and business funds: If you withdraw money from the business for personal needs, and also deposit personal money into the business, this turns the reports into a mess. Open a separate bank account for the licensed self-employed business.
• Thinking a licensed self-employed person is cheaper than an incorporated company: As a licensed self-employed person, you pay income tax + national insurance. As an incorporated company, you pay corporate tax (usually lower) + salary to yourself (with mandatory deductions). Sometimes an incorporated company is cheaper in a year. It depends on your income.

When Should You Contact an Accountant in Raanana or a Nearby City?

If you are considering opening a licensed self-employed business, or if you have already opened one and are not sure if you are doing it correctly, this is the time to speak with an accountant.

We recommend scheduling an initial consultation meeting in three situations:

• Before opening the business — to plan properly, understand the taxation, and not open with mistakes.
• In the first months — to check that your reports meet standards, that you are maintaining correct data, and that you are not missing documents.
• If something changed — income increases, you want to transition to an incorporated company, or you are uncertain about your tax structure.

Ben Or Kook Accountants offers an initial consultation meeting at no cost. In this meeting, we understand your situation, explain your options, and give you a clear plan. You do not have to be our client to use this meeting — it is so you can make an informed decision.

Comparison: Authorized Contractor vs. Private Limited Company

A question that comes up all the time: Should I open an authorized contractor or a private limited company? Let's put it in a table.

In short: If you're a self-employed freelancer in Raanana with reasonable income, an authorized contractor is usually the right choice. If you're on a path to grow, or if you want legal protection for your assets, a private limited company may be better in the long run.

How Much Does It Cost to Operate an Authorized Contractor in Raanana?

A natural financial question. Here's a reasonable range:

• Accountant fees: Typically between 300–800 shekels per month, depending on the scope of your business (how many expenses, how many bank transactions).
• Tax advances and National Insurance: Depends on your income. With an income of 5,000 shekels per month, budget roughly 1,200–1,600 shekels. With income of 10,000 shekels, it will be approximately 2,500–3,500 shekels.
• Contractor bank account: Typically between 50–150 shekels per month, depending on the bank.

In other words, if you estimate an income of 5,000 shekels per month, accounting and government expenses will be approximately 2,000–2,500 shekels per month. That's significant, but it's the investment to stay organized and compliant with the law.