Business license: the duty, the tracks and objecting to a refusal

Business licensing is one of the areas where small businesses fail not because they do not meet the requirements, but because they did not understand the structure of the procedure: who decides, who approves, and what is available to them when someone says no. The Law is built in layers, and each layer has its own rule.

What makes a business require a license

Business licensing does not apply to every business. Section 1(a) of the Law empowers the Minister of the Interior to set by orders the businesses that require a license and to define them, in order to secure seven purposes: a proper quality of the environment and prevention of hazards and nuisances; prevention of dangers to public safety and protection against robbery and burglary; the safety of those at the business premises or around them; prevention of the danger of animal diseases and prevention of pollution of water sources; public health, including proper sanitary conditions; fulfilling the purposes of planning and building law; and compliance with the laws on firefighting.

The seven purposes are not a list of intentions. They decide who will actually be the “approving body”: section 1(b) requires, for each of the purposes except fulfilling the purposes of planning and building law, consultation with the minister concerned, and the requirement for approval later derives from that consultation. A business set as requiring a license because of public health will go through the Ministry of Health; a business set because of public safety, through the police.

The prohibition itself is short and sharp:

Business Licensing Law, section 4 (unofficial translation)

No person shall run a business that requires a license unless they hold a license, a temporary permit or an expedited permit under this Law and in accordance with its conditions; a business that is not mobile shall not be run by a person unless the license, the temporary permit or the expedited permit they hold describes the premises in which they run it.

Note the end of the section: a license is not enough; the license must describe the premises. A business that expanded into the adjacent space, even in the same building, is operating outside its license.

Who decides

Section 5(a) provides that the licensing authority within the area of a local authority is the head of the local authority or whoever they authorized, and outside its area, whoever the Minister of the Interior authorized. For a mobile business that operates both within the area of a local authority and outside it, the licensing authority is the one in whose area the center of the business is located (section 5(b)).

The distinction between the licensing authority and the approving body is the key to the whole procedure. The application is filed with the licensing authority, and the authority, if it did not decide to reject it, passes it on to everyone who needs to approve (section 6(b)). A delay at an approving body is not a delay at the authority, and turning to the wrong body wastes months.

Three shortened tracks

A license based on an affidavit (section 6A3). The Minister of the Interior may set by order types of businesses that will receive a license based on an affidavit. Once the applicant has filed the affidavit and the documents, the licensing authority gives them written confirmation of their receipt, and the business is regarded as a business that was given a license until the license is actually given; the confirmation serves as proof of this. The authority gives the license itself within five days from the date it received the affidavit and the documents.

An expedited permit (section 6A1). The Minister of the Interior may set by order, with the consent of all the approving ministers, types of businesses that will receive a permit in an expedited procedure before a license is given, on two tracks: expedited permit A (without an inspection period) and expedited permit B (which includes an inspection period). The order will not include types of businesses whose licensing in an expedited procedure may harm the purposes in section 1(a).

A temporary permit (section 7B). The licensing authority may give a temporary permit before a license is given or until it is renewed, provided that operating the business will not cause significant harm to the purposes of the Law. The authority sets the period and may extend it, provided that the total of the periods does not exceed one year. Section 7B(a1) adds an important tool for businesses that are stuck: if the approving body did not reply to the application within the set period, the licensing authority may give a temporary permit, and if it did not reply by the end of a year, extend it for another year.

The real obstacle: planning and building

Section 8A1(a) is an independent and significant obstacle: the licensing authority will not give a license or a permit to a business that does not comply with planning and building law. The section leaves a narrow opening: if the authority believed that the breach does not harm the purposes in section 1(a)(1) to (5) and (7), and the engineer of the local committee confirmed that the breach does not substantially harm the purposes of planning and building law.

But the section itself defines what will count as substantial harm, including: a building that was built entirely without a building permit, or for which there is no approval under section 157A or a completion certificate; an offense under the Planning and Building Law, 5725-1965 (חוק התכנון והבנייה, התשכ״ה-1965) for which criminal or administrative enforcement proceedings are under way, including a pending demolition order or order to stop use; and running the business as a use of land contrary to the designation or use set in the plan.

The practical conclusion: the planning and building check is done before signing the lease, not after filing the application. A lease for a business that cannot obtain a license may turn out to be a heavy financial loss.

Added to this is section 8A2: for a business set as requiring a license in order to secure public safety and protection against robbery and burglary, the Israel Police may prevent a license or a permit from being given even if all the conditions are met, for reasons of public safety or security, including because of the applicant’s criminal record.

A preliminary opinion: the tool people do not use

Section 6E gives a right to ask the licensing authority or the approving body for a preliminary opinion on whether a proposed business fits the requirements of the Law and the regulations within their area of authority, and on the preliminary conditions that must be met before an approval, a license or a temporary permit is given.

The documents in section 6B are attached to the request, but the authority or the approving body may waive a document that is not needed for the opinion. This is the tool that turns the question “can we get a license here?” from a gamble into a written answer, and its cost is much lower than two months’ rent.

Validity of the license

Section 7A(a) sets a default of 15 years. The Minister of the Interior may set a shorter period for a type of business, provided that it is not less than five years, and for special reasons even less. The licensing authority may set a shorter period for a particular business, provided that it is not less than one year each time. For a license given on the affidavit track, section 7A(e) sets a floor of ten years, which can be shortened only with the approval of the Knesset’s Interior and Environmental Protection Committee and for special reasons.

Inspection, a report of defects and objection

Section 8D(a) sets a binding timetable for the authority: if the licensing authority or an approving body carried out an inspection at the business and found that a condition or a provision is not met, they must give the business owner a written report of defects within 30 days from the first date on which they visited the business. The report will be given within that period even if several visits were needed. For complex businesses, the approving minister may set a longer period, and for businesses for which a uniform specification must be published, no more than 90 days.

And if the requirement itself seems excessive to you? Section 7C5(a) gives a right of objection to an applicant or to the holder of a license, a temporary permit or an expedited permit who considers themselves harmed by a document or a condition required of them by the licensing authority or an approving body, including a condition set in the uniform specification, and except for a condition or a document set in legislation, and also against a refusal to give a license or a permit.

Section 7C5(a1) extends the right of objection also to an employers’ organization of which the business is a member, and if it is not a member, to an employers’ organization that is a party to a general sectoral collective agreement that was extended by an order. Such an objection can be filed on behalf of several businesses, provided that it concerns the same condition or document. Important to know: under section 7C5(b), filing an objection does not suspend the decision as long as it has not been decided otherwise.

The penalty

Section 14(a) sets a penalty of 18 months’ imprisonment or a fine under section 61(a)(4) of the Penal Law, 5737-1977 (and for a corporation, double the fine) for anyone who ran a business that requires a license without a license or contrary to its conditions, for anyone who did not comply with provisions set in regulations under sections 9 to 11B, and for anyone who did not comply with a demand to fix defects given to them under section 8D.

Three points that change the picture. First, section 14(d): the offense is one of strict liability. Second, section 14(b) provides that it makes no difference whether the person ran the business themselves or through their employee, whether it was their own business or another’s, and whether they were responsible for managing another’s business; and anyone who actually managed another’s business is regarded as responsible, as long as the contrary has not been proved. Third, section 14(a2) allows an additional fine for each day of a continuing offense for which a warning was given, and a “warning” includes a demand to fix defects.

And for managers: section 15(a) imposes on an officer of a corporation a duty to supervise and to do everything possible to prevent an offense, and anyone who breaches it is liable to half the fine. Section 15(b) creates a presumption: if an offense was committed by the corporation or its employee, it is presumed that the officer breached their duty, unless they proved that they did everything possible. An “officer” for this purpose is an active manager, a partner (except a limited partner), or an official responsible on behalf of the corporation for the area in which the offense was committed.

An order of steps that saves time and money

• Before a lease: check the building permit, the completion certificate and the designation under the plan. Section 8A1 makes each of the three an obstacle in its own right.
• Ask for a preliminary opinion under section 6E. A written answer on the preliminary conditions is worth more than any oral estimate.
• Find out whether your type of business is included in an order under section 6A3 or 6A1. A license based on an affidavit is given within five days, and the gap from the regular track is measured in months.
• Stuck with an approving body? Section 7B(a1) allows the licensing authority to give a temporary permit when the approving body did not reply on time. This is a request you send to the authority, not to the approving body. And if the authority extended the temporary permit for another year and the approving body did not reply by the end of that year either, the business is regarded as if it had received its approval; and if the licensing authority did not decide because of this, the business is regarded as one that was given a license, and the license itself is given within five days (section 7B(a1)(2) and (a2)).
• You received a report of defects: check that it was given within 30 days from the first visit, and that the inspectors do not demand anything that was not listed in it (section 8D(a), (e)). Against a demand to fix defects in a business that already has a license, you can ask for cancellation or a change within 14 days (section 8D(h)).
• A condition that seems to go too far? An objection under section 7C5 is possible also against a condition in the uniform specification, but it does not suspend the decision, so you need to keep acting in parallel.

Frequently asked questions

When does a business need a business license?

When the type of business has been set as requiring a license in an order of the Minister of the Interior under section 1 of the Business Licensing Law. Section 4 prohibits running a business that requires a license unless the person running it holds a license, a temporary permit or an expedited permit, and in accordance with its conditions, and for a business that is not mobile, when the premises are described in the license.

How long is a business license valid?

Section 7A(a) sets a default of 15 years. The Minister of the Interior may set a shorter period for a type of business, of no less than five years, and the licensing authority may set a shorter period for a particular business, of no less than one year each time. For a license on the affidavit track, a floor of ten years was set.

What do you do when a business license is refused?

Section 7C5 gives a right to file an objection, both against a refusal to give a license or a permit, and against a document or a condition that was required, including a condition in the uniform specification and except for a condition or a document set in legislation. The objection is filed with the licensing authority or with the approving body, as the case may be, and does not suspend the decision as long as it has not been decided otherwise. Against a decision on giving a license, a temporary permit or an expedited permit, canceling them or setting conditions in them, you can also file an administrative petition with the Court for Administrative Affairs (section 5(1) and item 7 of the First Schedule to the Administrative Courts Law, 5760-2000 (חוק בתי משפט לענינים מינהליים, התש״ס-2000)).

Can you open a business without a building permit?

Section 8A1 provides that the licensing authority will not give a license or a permit to a business that does not comply with planning and building law. The section defines what substantial harm is, including a building built without a permit or without a completion certificate, a planning and building offense for which enforcement proceedings are under way, and use contrary to the designation set in the plan.

What is the penalty for operating a business without a license?

Section 14(a) sets 18 months’ imprisonment or a fine under section 61(a)(4) of the Penal Law, and for a corporation double the fine. Section 14(d) defines the offense as an offense of strict liability, and section 14(a2) allows an additional fine for each day of a continuing offense for which a warning was given.