Common Business Entities

The first question usually asked before incorporating a business in Israel is what kind of business entity to form, whether a limited liability company, a partnership or another entity. While the final answer to that question depends on your specific needs, it is useful to know what the common business entities in Israel are.

A. An Israeli Company

The Israeli Companies Ordinance (ICO) defines a company as a corporation formed and registered in Israel, in accordance with the Israeli law.

It is necessary to register the company with the Registrar of Companies. The Israeli Companies Registrar may request that the incorporation documents be translated to Hebrew, the official language of Israel.

Most companies limit the liability of their members, usually in the form of shares. In this case, the term "Limited" (or the abbreviation "Ltd.") must appear as part of the full name of the company.

A company may be registered as a "Private Company" or a "Public Company", with securities registered on a Stock Exchange. Both types of companies must present annual reports, including audited financial statements to their shareholders.

A private company, consisting of 1-50 shareholders, and one director, may not offer or sell debentures or shares to the public and its articles of incorporation must contain restriction on transferability of its shares.

A public company, with a minimum of 7 shareholders, may offer stock or debentures to the public, but only after issuing a prospectus in accordance with the requirements of the ICO and the Securities Law. Also, a public company is obliged to publish an annual report that includes the audited financial statements and directors’ report, all to be filed with the Register of Companies, where they are available to the public.

If the company has a single shareholder and director it may register as an Israeli Private Singly Owned Company.

B. Israeli Foreign Company (an Israeli Branch)

A company incorporated overseas may establish an Israeli branch or local office in Israel as long as it is registered as a foreign company with the Registrar of Companies within a month of its establishment.

If the company uses the term "limited" as part of its name, then it must display its name and the name of the country in which it is incorporated in every invoice, letter, announcement, advertisement or other official publication.

In order to register, a foreign company must submit all the necessary documents to the Registrar of Companies. There is no requirement to publish financial statements of a private company.

C. Partnership

The Partnership ordinance defines a partnership as an entity that consists of persons who contracted to form a partnership. Personal liability of the partners is not limited unless they are limited partners of limited partnerships. A foreign partnership is also permitted to do business in Israel.

D. Self Employed

A self employed person works entirely for himself and is entirely liable for the business. The same rules of registration apply.

E. Cooperative

This type of business entity is found mainly in agriculture, (cooperatives such as a kibbutz, or moshav), transportation and in certain types of marketing operations associated with agricultural products.

F. Non Profit Organizations

These entities operate mainly as academic institutions, hospitals, charitable organizations and municipalities. Non profits are subject to a special law dealing mainly with the formation of such organizations and the way they may operate as such.

Please don't hesitate to contact us for additional information.