Company or Freelancer? How to Actually Decide
Whether to incorporate as a company or keep operating as a self-employed individual depends on personal considerations and a range of variables. A proper answer needs a calculation specific to your situation, ideally with a tax advisor or accountant, but here's the general shape of it.
Where the tax math points, by profit level
| Annual profit | Generally favors |
|---|---|
| Up to about NIS 200,000 | Licensed dealer (osek murshe), assuming this is your only income, to make full use of the tax benefits available to individuals |
| NIS 200,000–400,000 | A company can start to make sense, but only if profits stay in the company rather than being drawn out personally |
| Above NIS 400,000 | Generally a company: personal tax and National Insurance as a self-employed individual become more expensive than the equivalent through a company |
Other factors worth weighing
- Cost: bookkeeping, audit fees and annual company fees run 3–4 times higher than for a licensed dealer.
- Higher-risk businesses: a limited company offers better legal protection. Liability sits with the company, not the owner personally, if the business fails.
- Partnerships: where a business has more than one owner, a company gives a cleaner framework to run it and makes it easier to change ownership later.
The short version
Incorporating is worth considering if you're planning to grow revenue, need a legal separation between personal and business income, or want the option to keep profits in the company and reinvest them rather than drawing everything out as a dividend.