First-time entrepreneurs often ask the question — what type of company is more advisable to open? This question is especially relevant in Israel for small companies because there are two main options here — Osek Patur and Osek Murshe — and few know the differences between them. Below we will describe the main advantages of these types of business management and let you know which and when is better to open.
The main distinguishing feature of this type of business is the absence of the need to pay Value Added Tax (VAT) from all trading operations. This fact gives it the opportunity not to add the amount of VAT to the value of goods and services for customers.
In its turn, this type of business is obliged to pay VAT from all of its trade transactions. But at the same time, the osek murshe has the right to refund VAT on incoming transactions necessary for the operation of the enterprise (purchase of raw materials, rent of premises, equipment, etc.). Thus, it is possible to refund a portion of the investment.
If you plan to work mainly with private persons (for example, to make tailor-made clothes at home or to mend shoes, etc.) and your estimated annual turnover will not exceed 98707 shekels, it is better to formalize your business as an osek patur and offer to your customers more favorable prices due to deduction of the amount of VAT. At the same time, there should not be a lot of expenses for setting up the enterprise (purchase of materials, purchase of premises, etc.), otherwise you will lose too much because of inability to compensate for the input VAT.
In the event when your main trading partners are companies, it is worth to register the osek murshe. So, you will be able to offer your customers the opportunity of mutual deductions for the incoming VAT. Also, this type of business should be formalized if significant investments are required to start the enterprise. Due to the return of the input VAT, they can be partly compensated.
In any case, it should be remembered that each situation is specific, therefore only a professional can correctly analyze and advise the right form of legal organization of the enterprise. Applying to the company “Shmuel Brodetsky Rohe Heshbon” you not only get help in selecting the type of activity for your future business, but also receive a full range of services for its registration in state institutions.
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