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Israel LLC / Limited Liability Company Formation

Israeli Flag

An Israeli LLC / Limited Liability Company is formed with filings in the Companies Registrar which is regulated by the Israel Corporation Law. Its shareholders are protected from liabilities incurred by the company beyond their shares value.

Background

The State of Israel used to be a British colony of Palestine when it became independent in 1949. Its political system is a unitary parliamentary constitutional republic. It democratically elects a parliament known as the Knesset and has a president and a prime minister.

Israeli LLC Benefits

An Israeli Limited Liability Company (LLC) obtains the following benefits:

  • Limited Liability: All of the shareholders have limited liability beyond the value of their shares in the company.
  • One Shareholder/Director: A LLC can have a minimum of one shareholder who can either be a natural person or a legal entity. The sole shareholder can also be the sole director of the company.
  • Low Minimum Capital: The minimum authorized capital is only $1 USD per share.
  • Easier Access to the Middle East: Many consider Israel the “Mecca” of the Middle East and a gateway to its neighboring countries.
  • Educated and Skilled Workforce: Israel offers a skilled, educated workforce.
  • English: English is a popular language in Israel.

Map of Israel

Israel Company Name

An Israeli Limited Liability Company must be an original name which is not similar to any other company name. Either the word “Limited” or the abbreviation “Ltd.” must appear at the end of the LLC’s name.

Articles of Incorporation

The Articles of incorporation are considered a contract between the shareholders and the company and must contain the following terms:

  1. The Company’s Goal: All Israeli corporations must describe their goals. Goals often include the types of legal business, commercial, and/or trade activities.
  2. Limitation of Liabilities: Specify what (if any) company debts liabilities are limited or not.
  3. Shares and Capital: A description of the company’s capital and how it will be distributed amongst the shareholders. It must specify the types of shares it will issue including registered, preferred, with or without voting rights, management of share capital, etc.
  4. Rights: Describe the obligations and rights of the shareholders. Provide details of the management practices. Explain the rules and regulations and anything else considered important.

In essence, the Articles of Incorporation needs to explain the purposes and needs of the company.

Company Registration

Four documents need to be filed with the Companies Registrar:

  1. Registration Request: This is a statement by the original shareholders that they are authorized to form the company and hold shares permitted by the government.
  2. Statement by the First Directors: This statement declares the willingness by the directors to serve the company. If a legal entity is a director, its registered agent must be disclosed.
  3. Articles of Incorporation: The original Articles of Incorporation must be signed by all the shareholders and include their full names, addresses, legal ID numbers, and the number of shares they hold. The law requires that a licensed attorney verify all this information.
  4. Fee Payment: The payment of the registration fee.

Minimum Authorized Capital

The minimum authorized capital is $1 USD per share.

Limited Liability

All of the shareholders have limited liability beyond the value of their shares in the company as specified in the Articles of Association.

Shareholders

The shareholders can be natural persons or legal entities of any nationality and residing in any country. Unless the Articles of Association state differently, every shareholder has one vote for each share.

Company Shares

The LLC’s shares are private and cannot be sold to the public.

A LLC may establish different share classifications (i.e. preferred and regular shares), with each class providing different ownership and voting rights. The different share classes of the company must be stipulated in the company’s Articles of Association.

Dividends

Profits may be distributed to its shareholders as dividends. However, distribution of dividends cannot occur until these two criteria are fulfilled:

  1. a profitability test is conducted; and
  2. an audit verifies that every existing and future liability can be met after the distribution.

Israeli LLC

Director

A minimum of one director is required who can be a shareholder and residing in any country and a citizen of any country. While the law specifies that every company must have a Board of Directors, if there is only one director then there will be a one member Board of Directors.

Management

Officers (President, Secretary, and Treasurer) are not required. However, a LLC can appoint a General Manager and if one is not appointed the Board of Directors will manage the company subject to the following management structure.

The management of a LLC is conducted by:

  1. shareholders general meeting;
  2. the board of directors;
  3. the general manager; and
  4. any entity or person designated by the Articles of Association to act on behalf of the company on any specific matters.

Registered Agent and Office

Every LLC must have a registered office in Israel and a registered agent.

Accounting  

Every LLC must maintain daily accounting records. The LLC is required to prepare financial statements for every fiscal year. The company’s auditor and the Board of Directors must approve the financial statements and present them at the annual general meeting.

A company auditor who is a licensed CPA must be appointed by every company who approves the annual financial statement prior to the Board of Directors approval.

Taxes

The filing of annual tax returns is required. The Israeli corporate tax rate is 26.5%.

Annual General Meeting

Unless the Articles of Association state otherwise, an annual general meeting is required.

Special meetings can be called for by either the Board of Directors or a minimum of 10% of the shareholders.

Reports to the Registrar of Companies

Every LLC must notify the Registrar of Companies about any important changes such as Board of Directors membership, change of shareholders, change of registered office or agent, amendments to the Articles of Association, etc. Said notices must be filed within 14 days of their occurrence.

An annual report must be filed with the Registrar of Companies which includes shareholders and directors information. There is no requirement for the filing of financial statements.

The Registrar of Companies can enforce these notice requirements with fines imposed on companies failing to comply with these requirements.

Public Records

All of the documents filed with the Registrar of Companies are available to the public.

Registration Time

Registration can take up to four weeks for completion.

Shelf Companies

Shelf companies are available to purchase for faster registration.

Conclusion

An Israeli Limited Liability Company (LLC) obtains the following benefits: limited liability, minimum of one shareholder and director, low minimum capital, easy access to opportunities in the Middle East, an educated and skilled workforce, and English is popular.

Israeli Beach

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