How to open a business in Israel from scratch: the path of a Yazam Ole participant

Israel is known as the Startup Nation, but the bureaucratic system here can baffle anyone, especially in a new language. The good news is that for most types of small businesses, the journey from “zero” to your first legal income takes no more than a few weeks. The bad news is that mistakes at the very beginning are costly. At Yazam Ole, we have supported dozens of participants through this process and have seen which early decisions matter most.

Step 1. Select your legal form

In Israel, there are four main forms for doing business by an individual or a small team: Osek Patur (individual entrepreneur with a small turnover), Osek Murshe (individual entrepreneur with a turnover above the threshold or licensed activity), shutafut (partnership of two or more persons) and Ba'am - a limited liability company (analogous to an LLC). For most beginning new immigrants, the starting point is Osek Patur or Murshe. Read more about choosing between them in our article “Osek Patur or Osek Murshe”.

The company is appropriate if you: attract co-investors, want to limit personal liability, plan to use grants from the Israel Innovation Authority (they are available only to companies), or work in an area where it is required by the regulator.

Step 2. Registration with Rashut HaMisim (Tax Office)

This is the first official step. Apply for registration as self-employed (פתיחת תיק ברשות המסים) online through portal.taxes.gov.il or in person at the nearest Rashut HaMisim office. You will be assigned a tax identification number (מספר עוסק) - from now on you have the right to issue legal invoices.

What to bring: teudat zehut (identity card), bank account details, description of the type of activity (it is advisable to know the ISIC code of the industry). Registration with the tax office is free.

Step 3. Registration with Bituach Leumi (National Insurance)

After registering with the tax office, you must register with Bituach Leumi as an “oved atzmai” (עובד עצמאי - self-employed). The registration deadline is 90 days from the start of activity. Delay entails retrospective accrual of fees and penalties.

Bituach Leumi contributions for the self-employed are calculated on net income (after deducting professional expenses) on a two-step scale. Current rates are published on the website btl.gov.il and are revised annually. Contributions entitle you to social benefits: disability benefits, reserve-duty benefits and other payments.

Step 4. Open a separate current account

The law does not oblige individual entrepreneurs to have a separate business account, but in practice, its absence is the main cause of problems during tax audits. Mixed personal and business transactions leave you unable to properly document expenses. Open a special sub-account or a separate account at your bank - it will take a few minutes.

Step 5: Set up an invoice system

In Israel, the issuance of a heshbonit (invoice) is mandatory for every business transaction. For Osek Patur, a receipt (קבלה) is enough - a simple confirmation of payment. For Osek Murshe you need “heshbonit mas” (חשבונית מס) indicating VAT. Use specialized software (for example, Green Invoice, Hashavshevet, or Invoiceable) - it generates the correct documents and stores history.

Step 6: Licenses and Professional Requirements

A number of professions require a local license or recognition of a diploma: doctors, lawyers, accountants, architects, engineers, private security guards, kindergarten teachers and others. If you worked in a regulated profession in your home country, check with the Israeli professional registry to see what you need to practice here. The Yazam Ole programme helps participants understand professional requirements through one-on-one consultations.

Step 7. First clients: legally and confidently

Once registered, you can legally provide services and issue invoices. Don’t put off your first sale, even a symbolic one. The practice of Yazam Ole participants shows: the first payment can shift your mindset from “I’m going to figure it out” to “I’m an entrepreneur.”

What does the Yazam Ole programme provide?

Technically, opening Osek Patur is not difficult. It’s more difficult to understand the Israeli market, find the first clients in an unfamiliar language, and build a professional network from scratch. Yazam Ole is a 12-month programme that pairs you with a group of mentors, fellow entrepreneurs in a similar situation, and weekly classes on all the key topics of business in Israel.