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Inheritance & Probate

What happens to a deceased person's sole proprietorship business in Israel, and can the heirs keep running it?

A sole proprietorship (osek murshe or osek patur) is not a separate legal person, so it does not survive its owner. The assets, contracts and debts fall into the estate under the Succession Law 5725-1965 and pass to the heirs. The tax and VAT registrations are personal to the deceased and must be closed; an heir who continues trading opens a new file in their own name. Until a succession order or an estate administrator is in place, heirs who keep operating do so at their own personal risk.

Israeli law draws a hard line between a company and a sole trader. A private limited company continues to exist when a shareholder dies, and only the shares pass to the heirs. A sole proprietorship has no legal personality of its own: the business licence, the VAT registration and the withholding file all attach to the individual. On death the going concern breaks into its components, meaning equipment, stock, receivables, goodwill, leases and liabilities, and each one is treated as an estate asset under the Succession Law 5725-1965. Where the business needs to keep trading, the Family Court can appoint an estate administrator with express power to manage it.

For an heir abroad the timing problem is acute. Suppliers stop delivering, the bank freezes the business account, and employees remain entitled to wages while nobody holds authority to sign. Applying early for an estate administrator matters more here than in an ordinary estate, because the administrator can operate the business, pay staff and preserve goodwill while the succession order is still pending. Heirs should also notify the Israel Tax Authority promptly, since a business file left open continues to generate assessments against an owner who has died.

⚖ In Practice
  • Governing law: Sections 78 and 97, Succession Law 5725-1965 (appointment and powers of an estate administrator)
  • Competent authority: Registrar of Inheritance Affairs (Rasham LeInyanei Yerusha) for an uncontested succession order; Family Court (Beit Mishpat LeMishpacha) where the estate must operate a business
  • Tax closures: the VAT file and the income tax file (tik osek) are closed at the Israel Tax Authority (Rashut HaMisim); a continuing heir registers a new file in their own name
  • Fees: succession order application approximately NIS 500–600 plus a publication fee (2026); an estate administrator's fee is set by the court, commonly 3%–4% of estate value
  • Employees: staff of the deceased owner keep their rights under the Severance Pay Law 5723-1963, and the liability falls on the estate rather than on the heirs personally
  • Timeline: an estate administrator can be appointed in roughly 4–8 weeks in an urgent business case; a full succession order typically takes 3–6 months

From the full guide: Inheriting an Israeli Business: What Happens When the Owner Dies

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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