Over the last few years, the Israeli business climate has become more welcoming and supportive of small businesses and independent workers (atzmai'm). Many olim (new immigrants) find that going into business for themselves is the answer to their employment and financial needs. Many successful businesses such as restaurants, shops, import/export firms, and public relations firms have been established by olim. Other olim find ways to work on their own by working as translators, carpenters, plumbers, caterers, selling crafts and providing office services. Of course, certain professionals, such as writers, architects, therapists, dentists, artists, plumbers, electricians, etc. tend to work independently as a matter of course.
Atzma'im generally work with a wide variety of people, and they get the opportunity to see how a lot of organizations operate and how a broad spectrum of Israelis live. In addition, in certain lines of work, atzma'im are called upon to spearhead new and innovative projects, providing a source of professional challenge. Furthermore, if you are willing to work hard, and if ample work exists in your field, you may find that as an atzma'i you can enjoy substantially greater financial rewards than as a staff member with a full-time job.
However, being self-employed offers few guarantees. The lack of guaranteed work-flow -- and income -- is probably the biggest single disadvantage to being self-employed.
If you must have a steady source of income, due to family responsibilities or for your own peace of mind, then self-employed status will probably not suit you. Remember that it's never too late to go into business for yourself, so you might prefer to work as an employee for a period of time and assess your opportunities gradually.
Depending on the kind of work that you do, it may be possible to line up enough assignments to assure steady income for the first few months as an atzma'i before you actually leave the security of your full-time job.
Some olim retain a part-time salaried position for an initial period after becoming an atzma'i, thereby assuring that basic living expenses are covered by a steady source of income. In many fields, it is recommended to first work as an employee in order to first become familiar with all aspects of that profession in Israel.
Some people find the bookkeeping requirements imposed by the Income Tax, Value Added Tax and National Insurance Institute authorities to be confusing, although a good accountant can make the paperwork much less complicated.
Even if you can manage the paperwork and have plenty of work, you may find that you spend too much time collecting money which you have earned. Obviously, collections are not a problem when you work for someone else.
Finally, army reserve service (milu'im) should be taken into account by male olim. A month away from your business can be detrimental if not planned for in advance, although a spouse or business partner can cover for you while you are gone.
Trained professionals can make everything much clearer and simpler. This is true no matter what the scale of your operation. You may think you are saving money by handling everything on your own, but you may end up spending a great deal more if you are audited by the Income Tax authorities or are unaware of deductions that may apply to you.
Your lawyer will advise you on how to structure your business operations and will draft contracts or other documents required in your particular line of work. As your business grows, your attorney and accountant can advise you on any structural changes needed to maximize the profitability and efficiency of your activities.
Your accountant will explain how taxes are collected from self-employed persons, and what you must do to comply. In brief, you will be required to open files with three offices: Income Tax (Mas Hachnasa), Value Added Tax (Mas Erech Musaf) and the National Insurance Institute (Bituach Le'umi).
The Income Tax Authority will send you a form indicating what percentage of your revenues must be paid against you year-end income tax obligation. Each month, you will have to pay the percentage fixed on account, after allowing for any tax withheld at source by the payer. Most large institutions will deduct tax at source.
You will be required to collect Value Added Tax (VAT) on all of your revenues. The rate of VAT is currently 17%, and it is charged on all goods and services (with the exception of export-related goods and services). Your accountant will show you how to maintain books. In addition, you may be able to deduct the amount of VAT paid on certain business-related expenses from your VAT obligations each month.
VAT and Income Tax regulations also require you to issue specially-numbered receipts whenever you receive payments. The copies of these receipts, your expense vouchers and a simple record book, will provide most of the information you need to maintain an accurate accounting of all income and expenses.
National Insurance payments (made monthly) are calculated as a percentage of you income (after expenses). Your accountant will help you estimate the appropriate level of payment in your first year of being self-employed. Payments to the National Insurance Institute include coverage for child allowances, maternity leave benefits and compensations to soldiers when they serve in reserve duty.
If you employ workers you are required to open a Workers' File at your local Income Tax Office. The Income Tax Department will transfer the information to the NII which will open a separate Workers' File.
Your accountant can also give you specific details of allowable deductions. As a general rule, you may deduct reasonable expenses incurred in the course of conducting business. If you work out of your home, a portion of household expenses, such as rent, utilities and telephone, are deductible. Special regulations apply to deducting automobile expenses.
Depending on the type of business you wish to establish, it may be valuable to first research the prospective market, ascertain that there is a demand for the service or goods you wish to provide, and that the market is large enough to support you and your competition.
Electricians, engineers, architects, dentists, medical and para-medical professionals, tourguides and many other types of professionals need licensing or authorization from the appropriate sources in order to practice.
In some cases further training, internships and exams may also be necessary. It is recommended to all professionals to investigate exactly what is required of them.
Further, all commercial enterprises must have business permits in order to operate. Permits are usually issued by the municipalities after prior approval by other government departments such as the Ministry of Health. Permits must be renewed annually.
Application forms are usually available from the municipal licensing authority. It is necessary to prepare and file detailed drawings of the premises. Contact your local municipality or local council for detailed information.
One way to calculate your financial prospects as an atzma'i is to talk to people in your field. People in Israel are generally willing to provide frank advice and information to serious inquirers.
A pilot tour, several months before your aliyah, provides an ideal opportunity to meet with people in your field, as well as explore housing and educational options for your family.
The Ministry of Immigrant Absorption has a National Program for encouraging small businesses. Its goal is to assist the gradual entry of the immigrant entrepreneur into the Israeli business environment. Enterprise coordinators, employed by the Ministry at over 20 local branches, offer basic guidance and support in initial decision-making phases, distribute information and administer applications for loans.
Loans are offered by the Ministry of Immigrant Absorption under certain specific conditions, such as that immigrants manage their own businesses, and that the project must be economically feasible. Loans are paid back over a five-year period, with a portion of the loan becoming a grant. For more details, contact the Ministry of Immigrant Absorption.
The Centers can also help entrepreneurs find local partners, investors and employees, and can assist qualified applicants in obtaining financing for their businesses.
Some of the Centers function as "Business Incubators," which, in addition to all of the regular services offered, also provide new businesses working space at subsidized rates. For more information, contact a Small Business Development Center.
No exemption is given for the import of materials or merchandise. These require an import license and full payment of taxes. A business lift can be shipped from any country. For further information, contact the Customs Authority.