Licensed Dealer? Exempt Dealer? – The Guide to Starting a New Business
Starting a business: a complex and challenging process
Starting a business is a complex and challenging process, one that should be seriously considered before you get started. Statistics show that many businesses fail within the first year due to lack of experience and lack of understanding of the subject matter. On the other hand, starting a business can often be a stepping stone to a life of wealth and prosperity, a life that will lead the business owner to great success and take him to places he never dreamed of.
If you start a business correctly, if you follow the instructions and especially if you seek professional advice, you can achieve impressive achievements and live a rich and happy life. The question of whether it is worth opening a licensed or exempt business is just the beginning.
Let’s learn how to start a new business!
Anyone over the age of eighteen can start a business.
If the business owner is under the age of eighteen, the business will be registered in the parents’ name.
The first step in starting a business is preparing a business plan.
The business plan includes all the different aspects and stages of establishing a business and requires long-term thinking and examination of the business.
Already at the business plan stage, it is important to put together a forecast of the expected cash flow of the business. It is important to estimate the level of income of the business and to know all the expected expenses. Sometimes already at this stage you will discover that the business you dream of will not be able to sustain itself and it is worth recalculating the course.
The business plan must include the costs and expenses of establishing the business, running the business, the expenses for purchasing the required equipment, marketing and advertising, and more.
Obtaining a business license – In Israel, there are about a hundred businesses that require obtaining a business license in accordance with the Business Licensing Law of 1968.
To find out which businesses require a business license, you can contact your local authority and the Israel Police. If you require a business license, it is mandatory to obtain one before opening to avoid legal problems.
You have three options for starting a business: an exempt dealer, a licensed dealer, or a limited liability company.
Exempt dealer
An exempt business is suitable for any business owner whose expected annual turnover does not exceed NIS 99,006 per year, as of 2018. Not every professional is permitted to open an exempt business file even if they meet the annual turnover criterion. On the VAT office website, you can obtain up-to-date information about the professions whose practitioners are not permitted to open an exempt business file.
An exempt business is exempt from VAT payments; it is not permitted to collect them and cannot deduct them from business expenses.
Authorized dealer
A licensed dealer is a dealer whose annual turnover is not limited. He is required to report once a month on the business’s income and expenses, to pay VAT, and is entitled to deduct the VAT payments he has made for business expenses from the VAT payment.
Company Ltd.
A limited company is an entity separate from the shareholders, there is complete separation between the shareholders of the company and the company, and unlike an exempt and licensed dealer, the business owner is not responsible for the company’s financial obligations, but the company. Establishing a company is recommended for businesses that employ many employees, businesses with high profitability.
Every new business owner must inform the Income Tax Department about opening a business.
The notice of opening a business can be sent to the Income Tax Office in your area by registered mail. The notice must include the following details: full name, ID number, nature of the business, business address and private address, telephone number, and opening date.
The notification must be completed on Form 5329, which can be obtained at the Income Tax Office or downloaded from the Income Tax website. After you have reported the opening of the business, you will receive an advance payment slip, through which you will be required to report once every two months or a month, depending on the tax official’s decision, on the turnover of transactions and pay an advance tax according to the percentage determined by the tax official.
On the Income Tax website, you can obtain information about all your obligations as a business owner, such as managing accounting books, paying advances, submitting an annual report, employing employees, and more.
Every person must be registered with the National Insurance Institute and pay insurance premiums.
Self-employed workers are also required to report to the National Insurance Institute before opening a business and arrange payments.
After registering with the tax authorities, a business account must be opened at the bank.
It is important to separate the family account and the business account to avoid problems and inconveniences in the future.
An exempt and licensed dealer are not required to hire an accountant.
Only a limited liability company that is required to maintain double-entry bookkeeping must employ an accountant. However, experience shows that employing an accountant or tax advisor during the business establishment and operation stages can make the difference between a mediocre business and a successful one.
You’ve completed the bureaucratic procedures, it’s time to get started, work, succeed, and earn!
Preparing a detailed business plan
A business plan is a very important document that can form the basis for the success of your business. This plan should include all information related to the business, including:
- Business description: What product or service do you offer?
- Market analysis: Who are your competitors and what is your advantage over them?
- Marketing Strategy: How will you reach your customers?
- Financial projections: What are the expected revenues and expenses?
- Action plan: What steps do you need to take to start the business?
The importance of market analysis
In market analysis, it is important to understand the needs of your potential customers. What are they looking for? What is important to them? What price are they willing to pay? This analysis can help you tailor your product or service to the needs of the market.
Marketing strategies
Marketing strategies are critical to the success of your business. You should think about different ways to reach customers, such as social media advertising, sponsored advertising, content marketing, and more. It is also important to build a professional website that will showcase your business.
Financial forecasts
Financial projections are an integral part of a business plan. You should estimate your expected income and expenses to ensure that your business can be profitable. You should also include cash flow projections to ensure that your business can meet its obligations.
Legal aspects of starting a business
Starting a business also involves legal aspects that are important to be aware of. You need to make sure that your business meets all legal requirements, including licensing, tax registration, and agreements with suppliers and customers.
Licensing and permits
As mentioned earlier, some businesses require special licensing. It is important to check the specific requirements for your business and make sure you are operating in accordance with the law.
Legal agreements
When starting a business, it is sometimes necessary to sign agreements with suppliers, customers, partners, etc. It is important that the agreements are drafted professionally to avoid problems in the future.
summary
Starting a business is a challenging but rewarding task. With proper planning, understanding the market, and preparing a detailed business plan, you can increase your chances of success. Don’t forget to enlist the help of experts in various fields, such as accountants and lawyers, to ensure that your business operates legally and in an orderly manner.
Good luck on your new path as entrepreneurs and business owners!