Opening a Licensed Self-Employed Business in Herzliya

If you are self-employed in Herzliya and thinking about opening a licensed self-employed business, you are at an important crossroads. This is not just the end of paperwork — it is the beginning of a year filled with taxes, reports, and filings that must be organized from day one.

Ben Or Kook Certified Public Accountants have guided dozens of self-employed individuals in Herzliya and Ramat Gan through opening a licensed business. What we learned: most do not plan the accounting aspect in advance, and this causes problems down the line. Specifically — incorrect payroll slips, delayed tax reporting, or surprises in advance tax payments.

On this page, we will cover everything you need to know: what a licensed self-employed business is, how to open one, which reports and tax obligations await you, and when it is advisable to hire an accountant. In short — everything practical, without complicated jargon.

What is a licensed self-employed business and who does it apply to?

A licensed self-employed business is a legal and accounting structure for a self-employed person — an individual who decides to run a business in their own name, without a separate company. In Herzliya, as throughout the country, this is very common: contractors, consultants, technicians, designers, and more.

The word "licensed" means you are registered with the tax authorities as a self-employed individual, not as an employee. This means you pay income tax yourself, you are responsible for VAT (if eligible for registration), and you file an annual report every year.

A licensed self-employed individual can be:

• VAT-exempt self-employed — if your income is below the threshold (recently the threshold stands at approximately 90,000 shekels per year, but this may change). In this scenario, you do not file periodic VAT reports.
• VAT-registered self-employed — if your income is high or you chose to register. You report VAT every month or every two months, depending on your choice.

Not every self-employed person must be a licensed self-employed individual. Some prefer to be employees in their own company (Ltd.), or work as employees in another company. But if you decide to work for yourself without a company, licensed self-employment is the way to go.

Steps to Opening a Licensed Business in Herzliya — Step by Step

The process of opening a licensed business is not complicated, but it requires order and attention to detail. Let's go through each step:

Step 1: Choosing a Business Name and Checking Availability

First, decide on a name for your business. It doesn't have to be your personal name — it can be a business name. Check that the name is not already taken by others. You can do this with a simple search on the Tax Authority website or by asking an accountant in Herzliya.

Step 2: Submitting an Application for Licensed Business Registration

Submit a formal application to the Tax Authority. Today this is done digitally — through the Citizen Services portal or with the help of an accountant. You will need:

• ID number
• The business name you have chosen
• A brief description of the activity (for example: "technology consulting", "contracting work", "audit and annual report")
• The business address in Herzliya (or anywhere you operate)
• Banking information (your personal bank account)

Step 3: Receiving a Business Number and Registration Certificate

After approval by the Tax Authority, you will receive a unique business number. This is the number you will use in every report, on every invoice, in every tax payment. The registration certificate is the official document proving that you are a licensed business.

Step 4: Opening a Business Bank Account (Not Required, But Recommended)

It is not mandatory to open a separate business bank account, but it is highly recommended. This separates business income from personal funds and makes data management easier. Most banks in Herzliya offer business accounts on reasonable terms.

Step 5: Establishing Accounting Records

From the day you open your business, you must maintain accounting books. This means: recording income, expenses, invoices, and receipts. If you engage in activities that require VAT, you must also file periodic VAT reports. An accountant in Herzliya can help you establish this system — digitally or manually.

Step 6: Submitting an Annual Report (Within 3-4 Months of the End of the Tax Year)

At the end of the tax year (December 31), you must submit an annual report to the Tax Authority. The report summarizes all your income, expenses, and the tax you owe. This is usually done through an accountant or by yourself through the Citizen Services portal.

Income Tax and Reporting — What You Need to Know?

This is the topic that concerns many self-employed professionals. Let's make it clear.

As a licensed business owner, you pay income tax on your profit (income minus expenses). The tax rate depends on your income and personal status. Generally, self-employed individuals pay between 20% and 50% income tax, depending on their marginal tax rate.

The Tax Authority does not wait until the end of the year. You pay advance tax payments annually, based on an estimate of your income. If it turns out at the end of the year that your income was higher, you pay the difference. If it was lower, you may receive a refund.

Important point: Just like an employee who receives deductions on their payslip, a self-employed person must be prepared for this payment. You cannot finish the year without money to pay taxes. This happens frequently, and it's a problem.

National Insurance — Mandatory for Self-Employed

Self-employed individuals pay national insurance for themselves. This includes old-age pension, work disability insurance, and pensions. Payment is monthly, based on your reported income.

VAT — If You Are Registered

If your income exceeds the threshold (approximately 90,000 shekels per year) or if you chose to register for VAT, you file VAT reports monthly or bimonthly. VAT is a "sales tax" — you collect it from customers and transfer it to the Tax Authority. It is not your income; it is money you are responsible for.

If you work with other clients in Herzliya or anywhere else in the country, and VAT reporting could be complicated, it is advisable to coordinate with an accountant in Herzliya in advance.

Common Mistakes — And How to Avoid Them

Over the years we have worked with self-employed professionals in Herzliya, we have seen the same mistakes repeatedly:

Mistake 1: Not Separating Business Money from Personal Money

A self-employed person who pays from a personal bank account and withdraws from the business without documentation. By year-end, it is difficult to understand what is income and what is a personal withdrawal. This complicates the annual report and can lead to errors.

The Solution: Open a business bank account, or at least document every personal withdrawal separately.

Mistake 2: Not Keeping Receipts and Invoices

A self-employed person who receives income quietly without documentation. The tax authority may determine "estimated" income (higher) if you have no records.

The Solution: All income must be documented with an invoice or receipt. Every expense — with an original receipt.

Mistake 3: Not Planning for Tax Payment

A self-employed person who completes a profitable year, receives an annual report with a large tax bill, and has no money to pay. This results in interest and penalties.

The Solution: Set aside approximately 20-30% of your profit for tax payment. Or, if you work with an accountant, they will help you plan correct advance payments.

Mistake 4: Late Filing of Annual Report

An annual report filed after the deadline incurs an automatic penalty. It does not matter if the report itself is correct — the penalty exists.

The Solution: Note the deadline (typically 3-4 months from the end of the tax year). If you work with an accountant, they will remind you.

Mistake 5: VAT Reporting Errors

A self-employed person registered for VAT who files incorrectly — or forgets to file. This results in inquiries from the tax authority, audits, and penalties.

The Solution: If you are registered for VAT, document every transaction (sales and purchases) clearly. Report monthly or bimonthly, according to your choice.

When Should You Contact an Accountant in Herzliya?

That's a good question. Not every self-employed person needs an accountant, but most self-employed individuals reach a point where it becomes a necessity.

Contact an accountant if:

• You opened a licensed business (Osek Mursha) less than a month ago — to set up your books correctly from day one.
• Your income exceeds 200,000 shekels per year — in this scenario, tax and reporting become complex.
• You engage in international business or digital platforms (for example, e-commerce) — there are special tax considerations here.
• You are unsure about calculating advance tax payments or national insurance contributions.
• You received a letter from the Tax Authority — this is a sign that you should seek professional assistance.
• You want to plan taxes wisely, not just report at the end of the year.

Ben Or Kook Accountants work with self-employed individuals in Herzliya, Ramat Gan, Tel Aviv, and Petah Tikva. We provide practical accounting support — not just reports, but consultation that helps you understand what's happening in your business.

Your first consultation meeting is free of charge. During the meeting, we will discuss your needs, the relevant laws, and how we can help.