Business Glossary

In House
Refers to services performed by a company or corporation's employees rather than by a freelance person.

Independent Contractor
A non-employee (see "Employee") who is hired by a company for a specific project or time-frame, to complete a certain task. Unless stated otherwise in the contract between the photographer and company (see "Work-for-hire"), the independent contractor (photographer) retains the copyright to all works created while working on behalf of the company, per Copyright Law. Independent contractors do not get the benefits of being an employee of the company, such as access to insurance and benefit programs, paid sick or vacation days, or even regular paychecks. They do, however, set their own hours and make their own business decisions. Therefore, as independent contractors, freelance photographers need to maintain control of their copyrights in order to maximize income and to offset the added expenses of being self-employed.

Incorporation
The most complicated form of doing business, but worth the additional trouble and expense if your business generates enough income to make the services of an accountant and lawyer worthwhile. Incorporation can provide some tax advantages to small businesses. The business is taxed separately from the owners and/or stockholders. Incorporation can also provide a "corporate shield" against personal liability. Corporations must be registered with your state government.

Individual Retirement Account (IRA)
A retirement plan, offered by banks, brokerage firms and insurance companies, to which individuals can contribute each year on a tax-deferred basis. This tax-favored investment comes in two types: traditional and Roth. In a traditional IRA, you contribute money tax-deferred, which means it is taxed only when you withdraw it upon retirement. In a Roth IRA, you pay taxes up-front on the money you contribute, after which it is never taxed again. For a number of reasons, Roth IRAs are often better for younger people.

Insertion Cost
The cost of advertising space (usually) in a magazine.

Insurance
The cost of a wrecked car, stolen possessions, or medical treatment is often too much for anyone to bear alone. When you buy insurance, you agree to pay a company a small amount each year, called a premium, in return for coverage of the costs of certain future calamities, or "perils." Insurance comes in different varieties, depending on the type of peril it covers. Everyone should have health insurance, which covers most types of medical treatment and care. Car owners need auto insurance, homeowners need home insurance, and anyone with children should have life insurance and disability insurance. (see also term life insurance)

Interest
A fee for the use of money over time. he fee a lender charges in exchange for lending you money. This fee is calculated as an agreed-upon percentage of the amount of the loan per year (the "interest rate"). Interest rates vary between 0% and 20% or more, depending on the type of loan, the particular lender, and, often, on your credit rating. Interest can also be paid to you, as in the case of bonds and certain bank accounts.

Interest Rate
The percentage charged for a loan, usually a percentage of the amount lent. Also, the percentage paid on a savings account.

Investing
The act of using money to make more money.

Investment
An investment is something of value which has been bought in anticipation of a positive rate of return (i.e., you?ll make money), but which could also have a negative rate of return (you?ll lose money). Examples of investments include mutual funds, stocks, and bonds.

Investor
An organization, corporation, individual or other entity that acquires an ownership position in an investment, assuming risk of loss in exchange for anticipated returns.

Installment Plan
A plan requiring a borrower to make payments at specified intervals over the life of a loan.

Invoice
Invoices are requests to be paid for services rendered. They are the last step of the paper trail and lead to the conclusion of the contract. Standard business practices are to pay all invoices within thirty days. Many photographers request payment sooner, within 21 or even 14 days, while many businesses try to pay on 45, 60, or even 90 day schedules. As with all parts of a contract, the amount of time to pay is negotiable, but should be stated clearly in the Terms & Conditions (see below). Also can be used to transfer all or part of a photograph's copyright and stipulate other terms and conditions.

IRS
Internal Revenue Service. The branch of federal government that collects income taxes.

Layout
A visual representation of a project usually done by an art director.

Liability
Money an individual or organization owes; same as debt.

License (noun)
As copyright holders, photographers have the sole right to control the distribution of their work by, "sale, lease, rental, or lending", a license is a contract which grants the right to use an image in a certain way, in a certain place, for a certain period of time, to someone else. A license should specifically state how large the image may be used, how many times, in what specific media format(s), and for how long. It should also state any exclusivity (see above) restrictions, or should state "non-exclusive". All rights not specifically granted remain with the copyright holder, and a clause to that effect should also be a part of any license.

License (verb)
To license an image is simply to grant a license (see above) for its temporary use. As photographers, we should license images for use, not sell them outright

Lien
A creditor's claim against a property, which may entitle the creditor to seize the property if a debt is not repaid.

Liquidity
The ease with which an investment can be converted into cash.

Loan
A sum of money lent at interest.

Logo (or logotype)
A symbol, word or series of letters which identifies a product, corporation or service.

Marketing
The act (or art!) of finding clients or sales. Anything relating to that function.

Mark up
The difference between the cost of a billable expense and the amount charged to a client.

Media Buy
The insertion cost for an advertisement; a magazine's, newspaper's, television station's or TV network's charge to publish an ad.

Media Kit
Package of promotion literature and photographs prepared for distribution to newspapers, magazines and other media outlining the features of a particular product or service.

Mortgage
A temporary and conditional pledge of property to a creditor as security for the repayment of a debt.

Mutual Fund
Mutual funds are investments that pool together the money of many investors and invest it in a variety of stocks, bonds and money market securities. By owning a stake in a wide variety of investments, individual investors are protected from the possible ill fate of any particular investment. Unless you have enough money ? and time ? to invest in many different stocks, all of your stock investment should be in mutual funds.

Net Profit (Net Income)
Remaining profit after overhead or fixed expenses have been subtracted from gross profit.

Net income
The amount of money you've earned after paying federal and state taxes, FICA, and any other automatic payouts. Your "take-home" pay.

Net Worth
The difference between the total assets and total liabilities of an individual.

Non-Competitive (or "Non-Compete") Agreement
An agreement between an employer and an employee specifying that the employee, upon leaving employment, will not solicit assignments from his/her former employer's clients. These agreements are not legally viable unless a specific period of time and a specific geographic area is designated. Sometimes assistants or associates of a photographer are asked to sign such an agreement since these individuals have direct access to the photographer's clients.

Nonexclusive Unlimited Use
The client may use the photograph for any purpose any number of times, but so may the photographer.

Nonexclusive Limited Use
The client may use the photograph only for a specified purpose, and the photographer may use it any time for any purpose.

One Time Use
The client may use the image once in one single-language edition of one publication in a specified area.

Overhead
Fixed costs or general expenses. The cost of doing business consisting of expenses needed to maintain the business. It includes the recurring costs of utilities, rent, salaries, and administrative costs.

Paper trail
The collection of all documents generated for a given job. At the very least, the paper trail for assignments should include: estimate, contract, delivery memo, invoice and usage license, proof of payment, and terms & conditions. Appropriate pieces of the paper trail should be signed by both parties (contract, delivery memo, invoice) and the accumulated paper trail for every job should be archived for future reference.

Partnership
A form of business for more than one person and are like sole proprietorships in that income is reported through the individual partners; the partnership business is not taxed separately. Liability is also similar. The only reason to have a partnership is to create a stronger business, by combining resources, than you can alone. Good communication is absolutely essential, and all business related issues should be resolved in writing before the partnership is created. Bookkeeping, accounting and tax returns will be more complicated and costly. You should consult a small business lawyer before entering into a partnership agreement.

Pension (defined benefit plan)
The old-fashioned retirement plan, increasingly replaced by defined contribution plans like 401(k) plans. Under this type of plan, an employee would stay with a company for decades, and upon retirement begin to receive a steady retirement paycheck based on their length of service.

Periodical
Magazine.

Pitch, pitch account
A plan to attract clients. Advertising agencies and design studios often prepare advertising campaigns to show prospective clients how the agency would market the client's products. These projects are often involved and may involve photographers who are paid for their services and also promised assignments if the client engages the agency or studio as a result of the pitch. The photographers or illustrators are not usually paid industry standard rates for this work but often an agreement is made before the job begins which guarantees a bonus (appropriate payment per usage) if the work done is actually placed in advertising.

Point of Purchase (POP) advertising
Advertising prepared for use in retail stores (at the point of purchase). Model agencies and photographers have specific rates for this usage.

Pretax
A person's salary before state and federal income taxes are calculated.

Principal
The unpaid balance on a loan, not including interest; the amount of money invested.

Pro-Bono
Work without compensation. Typically, advertising work donated to "good causes" by photographers, ad agencies, printing companies, etc. Usually, in this work, the creative team is given more freedom than in normal advertising work.

Profit
Revenue minus all expenses, including salary. Profit is that portion of a business'revenue that should be used to grow the business. Profit is usually generated as a percentage mark-up on expenses and billable items. For example, if you mark up a $10.00 item by 30%, the client pays $13.00. The three dollar profit, minus any taxes you will have to pay, is money used to grow the business.

Profit or Loss Statement (P&L statement)
A Financial statement reflecting profit or loss over a period of time.

Promo or Promo Piece (or Leave Behind)
Brochure, card or other printed or digital medium used to promote a service, particularly a photographer. Usually mailed or delivered to prospective clients and/or offered during a portfolio presentation,

Public Relations
Refers to a P.R. firm. Changing the public's perception (image) of a particular company or individual is the normal goal.

Purchase Order
An order for goods or services. Written authorization to an independent contractor specifying the conditions of a assignment usually including fees and expenses. . Must be signed by a person of authority in the entity granting the order to become a legal contract. AKA P.O.

Rep or Representative
Photographer's agent. Usually takes a percentage of the photo fee. See commission.

Quote
A firm assignment price given for a specific job and specific conditions of that job. Unlike an estimate, once a quote is accepted, the price is fixed - but so are the job parameters. Even small changes may incur additional charges. In these situations many photographers require changes to be approved in writing during the shoot. Many photographers elimate details of expenses and just submit a solid number. See Estimate and Bid.

Retirement
The point in life at which you stop working. This is also the point at which you are entitled to withdraw money from your 401(k) or IRA. Generally, you must be at least 59.5 years old before you can declare yourself retired and withdraw your money without penalty; however, the rules are different for each type of retirement investment.

Return on Investment (R.O.I.)
Net profit divided by the owner's initial investment.

Return
The profit made on an investment.

Risk
The possibility of loss on an investment.

Secured cards
Credit cards guaranteed by a bank account or deposit made by the applicant. The credit limit is based on the amount of deposit and may be the same amount or larger. Secured credit cards are useful to establish or improve a credit record, particularly if someone has never had credit or has a poor credit history. The APR on a secured credit card is usually higher than on an unsecured credit card. Application and processing fees may also be required. Interest may or may not be paid on your deposit.

Self-employed
A term that indicates that you are your own employer and are responsible for your own overhead and salary, both the employee's and employer's share of all applicable taxes, as well as any liability incurred by your actions. If you are self-employed, and you are hired by another company to complete a project, then you are an independent contractor (see above) in relation to that company. (see "Freelance" and "Work-for-hire")

Simple Interest
Interest paid only on the original principal, not on the interest accrued.

Sole-Proprietorship
A sole proprietorship is an unincorporated business that is owned by one individual and is the most common form of small business ownership. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities and you undertake the risks of the business for all assets owned, whether used in the business or personally owned. You include the income and expenses of the business on your own tax return. The business does not pay separate corporate income taxes, but neither can it protect you from liability. Defaulting on business loans or expenses will therefore be a mark on your personal credit history. Adequate liability insurance is also a necessity. You will still need a business license and might pay other forms of business taxes to your city, county, or state.

Space rate
A rate of compensation tied to how much space (1/4 page, full page, etc.) a photographer's photographs occupy. Editorial assignments all used to be billed with the day rate (see above) as a guaranteed minimum against the space rate. In other words, if the day rate were $650, but the publication ran one photo at half page size worth $500 and a second photo at quarter page size worth $300, then the photographer would be due an additional $150 (500+300-650=150) upon publication. In a system where advertising rates are billed based upon how large an ad runs, it is only fair that photographers also be paid for how large a photo runs. If a client gets more benefit by running the image larger, then the photographer should be compensated accordingly.

Stock
Stock is ownership of a company. It is sold in "shares," because its owner owns a share of the company. The price of a company's stock fluctuates according to its supply and demand on the open market and generally reflects the company's current prospects. It is advisable to invest in a wide array of stocks so as not to have too many eggs in too few baskets (see mutual fund).

Stock Photo
A photographer's existing photographs, which can be licensed to a client.

Stock Photo Agency
An agency marketing stock photos for a fee, usually 50%.

Tear Sheet
Printed copy of an advertisement or editorial piece used as a portfolio sample by photographers and others. Often a printer's proof copy.

Terms & Conditions
The "fine print", the collection of conditions under which you agree to do business with other parties. Your Terms & Conditions should be clearly stated and included on all parts of the paper trail. Therefore, by signing and agreeing to your contract, for instance, a client also agrees to various conditions such as paying within thirty days, or being responsible for your original images while they are in their possession.

Term Life Insurance
The simplest and least expensive type of life insurance, term life insurance covers you for a specific period of time, usually 10, 15, or 20 years. If you die within that time, the insurance company gives a set amount of money to your beneficiaries, usually your spouse or children. Because this type of insurance is so inexpensive, insurance agents are often reluctant to sell it. They may try to persuade you to buy more expensive policies.

Trade advertising
Advertising to the trade - business to business. Usually in publications specifically targeted to certain businesses (trade magazines).

Trademark
A symbol used to differentiate a manufacturer?s products from other products. Normally registered and protected against infringement by law.

Trade Magazine
A magazine whose editorial content is focused upon a particular trade or business. See Trade Advertising. For instance, Photo District News is a trade magazine.

Unauthorized use
The use of an image for which a specific license has not been granted. Remember, a use must be specifically granted, otherwise it remains with the copyright holder. The law is very clear: it is up to the end-user to obtain a license to use a copyrighted work before doing so, otherwise the use is unauthorized.

Usage
The circumstances where, when, and how a licensed photograph is published. Used to determine licensing fees.

Vendor
A supplier of goods or services. A photo store or lab is a vendor to a photographer and a photographer is a vendor to his/her clients.

Withholding Tax
Tax payments deducted from an employee?s wages and paid to the IRS. Usually the payments are computed to be in excess of the individual's total income tax so that there is a refund at the end of the tax year. Note: the refund has been held by the IRS without interest.