This question was asked by Ono88 [US] Posted Jan 10, 2008 on this forum which was answered by myself. However the moderator Ranger [US] comments made me think is he for real? What he is trying to state is that a Sole Proprietorship can still issue a Pro forma invoice which is correct. On the other hand my question to him is:


What and who is a Sole Proprietorship? I am sure he did not obtain this position as Moderator without having any knowledge! Please note that a Sole Proprietor need to register as DBA if not as LLC or else it will not be classified as a registered/legal business. Is our good Moderator trying to encourage business seekers to operate their business without any legal connections/documents?

Replying to [Tell me why]:

I went back to read the reply given by the 'good moderator'. He did mention that an individual can also issue a pro forma invoice. He is correct. What he did not mention is that a firm run by an individual is a 'sole proprietorship' entity. It is a definition.

In many countries consultants do not register as 'sole proprietor', but still do business.

You said, "Please note that a Sole Proprietor need to register as DBA if not as LLC". Not all countries have DBA or permit LLC. (India is about to change its laws to allow that.). Legal requirements vary from country to country.

Basically, one may have to get a trade licence, even as an individual, to engage in business. Further registrations for sales tax, service tax, professinal tax, emploees' provident fund etc. come later. All of these depend on the law of the land.

Ranger had not gone into details, but he did not make any wrong statement. Rest assured, he has not lost his marbles (yet).

Replying to  [Tell me why]:  Part I


 

Thanks, R.N.  but now Im going to break down why I answered the way I did and then respond to his question of what a sole proprietor is.

Tell me why  response to the original question:

If you had stopped at the point of the underlined portion you would have been correct.  However a dba is not a company.  

Also in the second part of your answer your definition is wrong, a pro forma invoice is not a legal document.   In fact its not even close.  To many times websites or so called authorities on import/export get a bit over zealous about their definitions.   The only place you can get a complete answer is to check with CFR Title 19, by the way CFR stands for Code of Federal Regulations.   I can tell you by what means a customs broker makes his determination of value on.  Its the commercial invoice.  Since your a U.S. citizen you may want to check out the regs or you can go to export.gov or cbp.gov or treasury.cbp.gov 

Also your definition only fits a preforma invoice and is not the same as a pro forma invoice.

But a normal citizen can also issue a proforma invoice without being any type of business.   Here is an example and this happens all the time.

Private owner A  has a rare Les Paul Guitar he is looking to sell.  He is in the U.S.  the buyer B is a collector in Italy.   A issues a pro forma invoice to B indicating how it is to be paid for, how it will be packaged, and who is insuring the shippment and for how much, who the shipper is, and in what time frame this transaction must take place.

Quoting from [Ranger]:

Replying to  [Tell me why]:  Part I



 

Part II

IM really not sure where you got your definition of a pro forma invoice from though.  Its true it is a document but not a legal document.  A pro forma invoice is issued to a buyer that has submitted an (RFQ) Request For Quote.  There is nothing legally binding in a pro forma invoice.  Only upon the action of the buyer fullfilling the terms of the pro forma invoice and a commercial invoice issued can there legally be assumed that a contract exists between a buyer and a seller.

I think in what your having a problem understanding is the difference between a commercial transaction and a private transaction.  The original poster did not say that the transaction was commercial and only asked if it was possible.  

To say that an individual can't export is to say also that an individual can't import and if you would or so inclined please show me where in CFR Title 19's 2000+ pages pertaining to U.S. customs do you find any such statements.  Also please show me where a pro froma invoice is required to ship anything. 

In the U.S. you must file an SED no matter who you are.   If you ship via the USPS you must use either of these forms 2976 or 2976A which is decided by the weight of the package.  For Airmail The commercial invoice form 6182 needs to be used. 

Last but not least the answer to your question. 

Sole Proprietor:  A single person or a husband and wife who are equally responsible for the debts of the business and who also share in the decisions and financial contribution of the business, also if a person is a single member of an LLC they to can be deemed a sole proprietor.  A sole proprietor who is not an LLC may also not be required to register their business if using their own name or names and their personal Tax ID#s.

Now thats my definition, but I can back it up or you can check ot the "Small Business and Work Opportunity Tax Act of 2007" or you can check it out with the Internal Revenue Service.

Ranger

Replying to [Ranger]:very clear!

Replying to [Tell me why]:

A proforma invoice - this is a tax invoice for goods/services rendered?
If so, then this is usually issued by someone with a registered business. (The business may be registered as a compnay/partnership/sole trader) Whatever form the business takes, the invoiced amount becomes part of their business' taxable income.
Therefore, by law, that business is required to issue the invoice, even if the amount is only $1.00.

From the normal citizen's standing (by normal i'm assuming someone who does not have a business) the matter is different.

In Australia, according to my accountant, the "normal citizen" can be allowed to earn up a small amount of income derived from a 'hobby'. I can't remember what that amount is but it is very small. Over that amount the money is then required by law to be declared as part of their income and be taxed on it. Ebay store owners by law should be registered as a business and thus should provide their buyers PI. But for someone who wants to sell something in the house to make room for other things once in a while, then no PIs are required.

I suppose different rules for different countries.

Quoting from [kendyson74]:


Replying to [Tell me why]:

A proforma invoice - this is a tax invoice for goods/services rendered?

If so, then this is usually issued by someone with a registered business. (The business may be registered as a compnay/partnership/sole trader) Whatever form the business takes, the invoiced amount becomes part of their business' taxable income.

Therefore, by law, that business is required to issue the invoice, even if the amount is only $1.00.

From the normal citizen's standing (by normal i'm assuming someone who does not have a business) the matter is different.

In Australia, according to my accountant, the "normal citizen" can be allowed to earn up a small amount of income derived from a 'hobby'. I can't remember what that amount is but it is very small. Over that amount the money is then required by law to be declared as part of their income and be taxed on it. Ebay store owners by law should be registered as a business and thus should provide their buyers PI. But for someone who wants to sell something in the house to make room for other things once in a while, then no PIs are required.

I suppose different rules for different countries.

 

Since when can a pro forma invoice be substituted for a commercial invoice?  By your explanation someone who buys something off Ebay for instance for personal use can't and won't get it cleared through AU customs.  On the other hand if the seller sends the buyer a pro forma invoice for the single item customs can then see that it was sent by an individual and was sold to the AU buyer as a personal use item.  I don't think your going to be trading in several hundred antique guitars.

I believe even for AU Customs you must produce a Commercial Invoice within a set amount of time or face an AU Customs levied fine.  The pro forma invoice is nothing more than a message to the buyer in advance of the sale describing how its to be paid for, where payment is to be sent,  how many of each item, the unit cost, total cost and the freight carrier if the carriage is paid by the seller.  The pro forma is not an official document nor is it a contract. 

You also may want to look up pro- in a dictionary.   "Acting in the place of; substituting for"

Ranger