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Israel Routes to Market

So you've decided to expand your business in Israel and researched your market. Now it's time to decide how you will register or expand to business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

With a similar structure to companies in the UK, here are your typical options when expanding a business into Israel:

Limited Liability Company
A limited liability company is where the owners liability is limited to the amount invested in the business. It is the most common way of conducting business in Israel and generally takes two forms:

Private Company
Consisting of between 1 and 50 shareholders, shares cannot be sold to members of the public. There must be at least one director appointed and the business must be registered with the Registrar of Companies.

Partnership
With approval from the Registrar of Partnerships, a foreign investor may form a partnership. The business requires at least one Israeli resident who is able to accept legal notices on the partnerships behalf. The process for an overseas investor setting this type of business is similar to what Israelis would need to do.

Sole Trader
The registration is similar to a limited liability company, but a self-employed person is able to trade as an individual. The sole trader will be personally liable for any potential losses the business may make.

Public Company
With a minimum of seven shareholders, the business must be registered on the stock exchange. Members of the public are entitled to buy shares and the members are only liable to the extent of their investment.

Foreign Company/Branch
A business can open an office or branch in Israel but it must register the business as a foreign company with the Registrar of Companies within a month of establishment.

If it is a limited company, then the name and country in which it is incorporated must be included on all publications, including invoices and advertisements.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Israel

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Israel include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in Israel: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Israel encourages franchising, which is promotes as a fast and efficient avenue for business expansion. It is the preferred way for entrepreneurs interested in starting their own business while relying on the commercial experience and brand name of the parent chain.

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