How to Register a Business in the US from Israel

Step 1: Benefits of starting your US business from Israel

Starting a US business from Israel presents a plethora of advantages that cater to Israel's innovative and entrepreneurial spirit. For one, the United States boasts one of the largest and most dynamic economies in the world, offering a vast market with numerous opportunities for growth and expansion. Israeli entrepreneurs can tap into this expansive market, leveraging their technological prowess and innovative products to meet the diverse needs of American consumers. Furthermore, the US provides a stable economic and legal environment, ensuring that businesses can operate with a high degree of confidence and security.

Another significant benefit is the access to funding and investment opportunities. The US is home to a robust venture capital ecosystem, with numerous investors eager to fund promising startups. Israeli entrepreneurs can benefit from the extensive network of US investors, gaining access to the capital needed to scale their ventures. Additionally, the cultural and business ties between Israel and the US are strong, fostering a supportive environment for Israeli businesses. With initiatives such as the US-Israel Binational Industrial Research and Development (BIRD) Foundation, entrepreneurs can find ample resources and support to bridge the gap between the two countries, facilitating smoother operations and expansion.

Step 2: How to start your US business from Israel

Starting a US business from Israel involves several steps that ensure compliance with both Israeli and American legal requirements. First, it's essential to decide on the structure of your business, such as a sole proprietorship, partnership, limited liability company (LLC), or corporation. Many Israeli entrepreneurs choose to form an LLC due to its flexibility and limited liability protections. Once you've decided on the business structure, you will need to select a unique business name and verify its availability through the US Patent and Trademark Office.

After settling on a name, the next crucial step is registering your business with the relevant authorities. For Israeli entrepreneurs, this often means filing necessary documents with a state agency, such as the Secretary of State, in the US state where you wish to incorporate. Additionally, obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is required for tax purposes. Since you are operating from outside the US, utilizing services of a Registered Agent in the state of incorporation will be necessary for receiving legal documents. Furthermore, consider opening a US bank account and exploring options for remote management and compliance with both local and international regulations.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Israel

Understanding Compliance Requirements for Running a US Business in Israel

Running a US business in Israel requires navigating a complex landscape of legal, financial, and regulatory considerations. This guide aims to help you understand the primary compliance requirements to ensure a smooth and lawful operation of your business in Israel.

Legal Structure and Registration

• Choosing the Right Legal Structure: US businesses can operate in Israel as branch offices, subsidiaries, or as a new company. Each structure has its own implications for taxes, liability, and day-to-day operations.
• Registering Your Business: All businesses must be registered with the Israeli Registrar of Companies. This involves submitting necessary documentation, including articles of association and information about directors and shareholders.

Taxation

• Corporate Tax Rate: Knowing the current corporate tax rate in Israel is crucial. As of the latest update, the standard corporate tax rate is 23%.
• Value-Added Tax (VAT): Businesses must register for VAT, which is currently set at 17%. VAT returns are generally filed monthly or bi-monthly.
• Double Taxation Treaty: Israel and the US have a tax treaty to prevent double taxation, which can affect how your business is taxed in both countries. Understanding the treaty's provisions will help you optimize your tax liabilities.

Labor Laws

• Employment Agreements: Israeli law requires that all employees receive written employment agreements outlining their terms of employment.
• Minimum Wage: Ensure compliance with Israel's minimum wage laws, which are periodically updated.
• Employee Rights: Familiarize yourself with mandatory benefits such as annual leave, sick leave, and social security contributions.

Intellectual Property (IP) Protection

• Registering Your IP: Protect your intellectual property by registering trademarks, patents, and copyrights with the Israeli authorities.
• IP Enforcement: Be aware of the legal avenues available for enforcing your IP rights in Israel.

Data Protection and Privacy

• Compliance with Israeli Law: Businesses must comply with the Protection of Privacy Law, which governs how personal data is collected, stored, and used.
• Data Transfer: If your business transfers data between Israel and the US, ensure you comply with both Israeli regulations and relevant US laws, such as the General Data Protection Regulation (GDPR) if applicable.

Operational Considerations

• Licenses and Permits: Certain industries may require specific licenses or permits to operate in Israel. Ensure you identify and obtain all necessary permissions.
• Local Partnerships: Collaborating with local entities can facilitate smoother operations and ensure compliance with local practices and norms.

By understanding these key compliance requirements, US businesses can better navigate the Israeli market and ensure their operations are lawful and efficient.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Israel

Understanding Tax Obligations for Running a US Business in Israel

When running a US business in Israel, it is important to be aware of various tax obligations that can impact your operations. This article outlines several key considerations to help you navigate the complexities of international taxation.

1. Dual Taxation Agreements

One of the first considerations is the tax treaty between the United States and Israel. The treaty is designed to prevent double taxation and can provide relief through tax credits and exemptions. It is crucial to understand how income, profits, and other revenue will be taxed in both countries.

2. Corporate Income Tax

Israel imposes a corporate income tax on businesses operating within its borders. The current rate should be verified as it can change. You may also need to determine if your business qualifies for any reductions or incentives under Israeli law.

3. VAT (Value Added Tax)

In Israel, Value Added Tax (VAT) applies to most goods and services. If your business sells products or services in Israel, you will need to register for VAT and comply with filing and payment requirements. The standard VAT rate should be confirmed with local tax authorities.

4. Reporting and Compliance

Compliance with local tax laws involves timely filing of tax returns and accurate reporting of income and deductions. US businesses must maintain detailed records and may need to engage local accounting services to ensure adherence to Israeli regulations.

5. Transfer Pricing Rules

Transfer pricing regulations govern the transactions between related entities. These rules require that prices charged in intercompany transactions be consistent with the market rate. Understanding these regulations is vital to avoid penalties and ensure proper documentation.

6. Employee Taxation

If you employ staff in Israel, you must account for Israeli employee tax obligations. This includes payroll taxes, social security contributions, and income tax withholding. Understanding the specific requirements can help you manage payroll effectively.

7. Consultation with Experts

Given the complexities of international tax obligations, consulting with tax professionals experienced in both US and Israeli tax laws is advisable. They can provide tailored advice, ensure compliance, and optimize your tax position.

Running a US business in Israel involves a comprehensive understanding of various tax obligations. By considering dual taxation agreements, corporate income tax, VAT, reporting requirements, transfer pricing rules, and employee taxation, you can navigate the complexities and ensure your business remains compliant.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country