Is a Licensed Business Owner Required to Hire an Accountant?

What is a Licensed Business Owner and What Are Their Obligations?

A licensed business owner is a self-employed individual or business owner recognized by the tax authorities as engaging in regular and continuous business commerce. Unlike a exempt business owner, who maintains annual income up to 305,000 NIS (under certain conditions), a licensed business owner is required to file detailed annual reports, submit periodic VAT reports, and maintain organized accounting records.

The obligation to maintain books and financial statements is a legal requirement imposed on every licensed business owner, whether self-employed, a private limited company owner, or a partner in a partnership. Israeli tax authorities require the preservation of methodological evidence of business activity, which is the way to demonstrate that the submitted reports reflect the economic reality of the business.

When Is an Accountant Required for a Licensed Business Owner?

The straightforward answer is: almost always. Subject to an examination of your specific business characteristics, a licensed business owner is generally required to hire a qualified accountant for the preparation of annual reports, income tax reporting, and VAT reporting. Although the law does not explicitly prohibit self-management of reports, in practice self-management is risky and requires deep knowledge of specific legislation.

The reasons for this are numerous: First, annual reports of a licensed business owner must comply with stringent accounting standards. Second, errors in reporting can lead to financial penalties, tax interest, and government agency investigations. Third, a qualified accountant can identify opportunities for legal tax planning and tax savings.

What Does the Law Say About Annual Reports?

The Income Tax Ordinance and supporting laws require a licensed business owner to submit an annual report to the tax authorities within a set timeframe from the end of the tax year. The report must include detailed information on income, expenses, assets, and liabilities. Additionally, a licensed business owner must submit periodic VAT reports (monthly or bi-monthly, depending on their classification).

Keeping books and accounting records is a legal obligation that cannot be ignored. These documents must be retained for certain periods under law, and data protection and government oversight laws mandate such retention.

Do You Really Need an Accountant? Scenario Comparison

The answer depends on several factors: business size, type of activity, complexity of financial transactions, and whether you have employees. In any case, Ben Or Kok Accountants strongly recommends working with a licensed accountant, even if the law does not explicitly prohibit self-management of financial reports.

Scenario 1: Sole Proprietor Without Employees

Even if you are a sole proprietor, you are required to file an annual report. Self-managing financial reports can lead to errors, inaccuracies in income tax calculations and VAT adjustments. An accountant will ensure that the report reflects reality and that you pay only the lawful tax owed.

Scenario 2: Limited Liability Company or Partnership

A limited liability company or partnership is required to maintain professional bookkeeping and detailed financial statements. Additionally, these reports may be subject to government audit or banking requirements. Using a licensed accountant is almost always necessary and has legal value.

Scenario 3: Sole Proprietor With Employees

If you have employees, you must maintain detailed payroll management, payslips, report to the National Insurance Institute, and manage pension funds. This management requires deep knowledge of labor and tax legislation. An accountant with experience in payroll management can save you from costly errors.

Scenario 4: International Business or Complex VAT

If you have international business operations, complex VAT transactions, or require lawful tax planning, it is absolutely essential to use an accountant with experience in these areas. Errors in this field can result in substantial penalties.

Cost Comparison: Exempt Business Owner vs. Licensed Business Owner

One of the central questions business owners ask is: How much does an accountant cost? The answer depends on the scope of activities, complexity of reports, and number of transactions. However, it is important to understand that an accountant's fees are typically significantly lower than the risk of errors in financial statements.

Typical Costs for a Licensed Business Owner

A sole licensed business owner with simple operations can expect annual costs within a certain range (depending on the scope of activities). A private company (Ltd.) with employees or complex operations will typically pay more. Ben Or Cook Accountants offers transparent and flexible pricing tailored to your specific needs.

What is Included in Accountant Services?

• Bookkeeping: Ongoing management of records, receipts, and invoices.
• Annual Reports: Preparation of a detailed annual report and signature by a certified accountant.
• VAT Reporting: Filing of periodic VAT reports to tax authorities.
• Income Tax Reporting: Preparation of an annual income tax report and calculation of tax liabilities.
• Consulting: Advice on tax planning, deductible expenses, and financial management.
• Audit Support: Representation before tax authorities in case of audit or inquiries.

Ben Or Cook Accountants offers a complimentary initial consultation, so you can understand your needs and receive an accurate cost estimate.

Rights and Obligations of an Authorized Business Owner

As an authorized business owner, you have specific rights and obligations toward the tax authorities. Understanding these obligations is critical to avoiding penalties and audits.

Obligations of an Authorized Business Owner

• Filing an Annual Report: Obligation to file an annual report to the tax authorities within the prescribed time frame (usually within 6 months from the end of the tax year).
• Periodic VAT Reporting: Obligation to file VAT reports at the required frequency (monthly or bi-monthly).
• Record Keeping: Obligation to maintain books, receipts, invoices, and supporting documents for the period prescribed by law.
• Reporting Changes: Obligation to notify the authorities of changes to the business, such as change of address, business closure, or change in legal structure.
• Reporting Foreign Income: If you have foreign income, you are obligated to report it to the tax authorities.

Rights of an Authorized Business Owner

• Permitted Deductions: You are entitled to deduct permitted expenses from your income, such as employee wages, rent, electricity, and telephone.
• Capital Allowances: Under certain circumstances, you are entitled to capital allowances on fixed assets.
• Tax Deductions: Under certain circumstances, you are entitled to tax deductions on a legal basis, such as deductions for employees with disabilities.
• Authority Consultation: You are entitled to consult with the tax authorities regarding tax calculation or reporting questions.

A licensed accountant will ensure that you utilize all your rights and that you pay only the legally owed tax. This is an essential part of lawful tax planning.

Ben Or Kook — Personal and Available Accounting Services

Ben Or Kook Certified Public Accountants is an accounting firm specializing in assisting freelancers, self-employed professionals, and companies in Petah Tikva and Ramat Gan. Our office offers comprehensive accounting services, covering bookkeeping, annual financial statements, VAT reporting, payroll management, and tax planning.

We believe that every Israeli business owner deserves quality, available, and personalized accounting services. Therefore, we offer a free initial consultation, so you can understand your needs and receive an accurate cost estimate. Our service is digital and modern, with easy document submission and available communication.

If you are a licensed professional or business owner seeking a qualified certified public accountant, we are here to help you. Contact Ben Or Kook today and receive your first accounting consultation at no cost.