Forms, Documents, and Government Requirements for Opening a Staffing Agency

Last Updated February 2, 2024

Are you planning to open your own staffing agency? If so, the first thing you should do is learn about the paperwork and requirements to open a staffing agency, as there are several items to complete before you should get started.

Understanding what’s required to launch a staffing agency is the very first step of what hopefully becomes a successful journey running your own placement firm. Therefore, read on for a list of all the forms, documents, and government requirements you need to start a staffing agency.

What Is Required to Open a Staffing Agency?

It can be overwhelming when trying to determine where to start when you’re in the earliest stages of business planning. So for clarification purposes, we’re going to break this down into four different sections.

• Choosing Your Business Structure
• Government Requirements
  • Federal Documents
  • State Documents
• Personal Documents
  • Business Plan
  • Tax Classification
  • Business Bank Account
  • Company Website
  • Non-Disclosure Agreement (NDA)
  • Employment Agreement
  • Consulting Contracts
  • Job Application Template
  • Invoice Template
• Staffing Agency Insurance Requirements

All four of these bullets are essential to understand and complete before you get your placement firm up and running.

Choosing Your Business Structure

As with any business, you’ll first need to choose your business structure, between an LLC, sole proprietorship, partnership, corporation, and S Corporation. At some point, you’ll also want to apply for insurance coverage for both clients and employees.

There are pros and cons to each structure, yet your decision might be made up for you. For example, if you have a business partner, you won’t be starting a sole proprietorship, as these are restricted for individual business owners. A partnership requires at least two members, a corporation is owned by multiple shareholders, and an LLC can be owned by one or more individuals. An S corporation is a bit more complex, as with this structure, classes of stock cannot be issued with different financial rights (for instance, providing one shareholder preference to certain distributions over another shareholder). Meanwhile, LLCs have no restriction when it comes to subsidiaries.

You can register your business via the U.S. Small Business Administration website.

Government Requirements for Opening a Staffing Agency

We can divide the government documents required to open a staffing agency into two categories:

• Federal documents
• State documents

Federal Documents Required for a Staffing Agency

First, you’ll need to assemble and complete your federal documents, beginning with an Employer Identification Number (EIN).

EIN (Employer Identification Number)

The EIN is the federal government’s designation of your staffing agency’s ability to hire employees. Obtaining one of these 9-digit numbers is simple. Go to the IRS website and fill out the online form. It takes only a few moments for your number to be issued.

You can apply for an EIN on the IRS website, by mail, or by fax. You can also apply by phone if you are abroad.

Here is a quick 3-step guide to applying for an EIN:

1. Determine your EIN eligibility: To be eligible for an EIN, you must have valid taxpayer identification and your business must be in the United States or its territories.
2. Review and complete the application form: Check a copy of Form SS-4 for the requirements for an EIN application. Once you have everything needed, fill out the form.
3. Apply through the IRS website, mail, or fax: Complete the application with your preferred method. Typically, online applicants receive an EIN instantly, fax applicants get it in 4 business days, and mail applicants get it in 4 weeks.

IRS Form 941 (Employer’s Quarterly Federal Tax Return)

As its name implies, submit Form 941 with the correct payment to the Internal Revenue Service four times each year. The due dates are April 15, July 15, October 15, and January 15. You may need legal or financial help with this form.

Form W-4 (Employee Withholding Certificate)

New employees fill this form out upon hire to determine how much tax will be withheld each pay period and sent to the IRS. You will need a stack of these forms. Employees can fill them out and change their tax withholding at any time.

Form I-9 (Employee Eligibility Verification)

This form comes from the U.S. Citizenship and Immigration Services department. Employees fill this out upon hire to prove they are legally qualified to work in the U.S. You will need to confirm their eligibility by including a copy of their Social Security card, passport, driver’s license, or alien authorization number.

State Documents Required for a Staffing Agency

Outside of federal documents, there are a few essential state documents to file.

Articles of Incorporation

Articles of Incorporation are the legal documents filed with the Secretary of State’s Office in your state that allow you to form a corporation in that state.

These are essential documents if you decide to begin your staffing agency as a Limited Liability Company (LLC) or corporation. This step is usually unnecessary if you choose to run the business as a sole proprietorship.

State Tax ID Number

Similar to the EIN, each state expects you to have a personalized employer tax identification number based on your location so they can collect state payroll taxes.

City/County Documents

Check with your city and county laws to see if there are any specific requirements for business owners in your area other than what is listed here.

Business License and Certification

This piece of paper authorizes you to conduct business within the local jurisdiction (city or county) of your business’s residence. You renew this license each year.

Your first application will ask you to estimate how much gain in sales you expect in the start-up year. Your business tax will be based on that amount. Once tax season rolls around, denote the exact amount of money you made in sales to determine your local business tax.

Other State or Industry-Specific Licenses

Each state has offices of finance and consumer affairs. They will have further detailed information concerning the types of paperwork required to effectively start a small business, including your new staffing agency. Depending on the type of businesses you serve, you may have to fulfill additional requirements.

The SBA.gov resource for registering your business has a section where you can look up your state to find any other requirements. This may include registering with the Secretary of State’s office, Business Bureau, or a Business Agency. You can also check out your state’s website for more information on these licensing requirements and how you can address them.

Personal Business Documents and Items Required for Opening a Staffing Agency

While most of these documents aren’t required by law to open a staffing agency, but they will prove highly beneficial to ensure financial success. Here are just a few that can help you get started.

Business Plan

Any business entity should have a detailed business plan. This is the document that sets up how you intend to run your staffing agency. Additionally, you will need one to solicit loans or other types of outside financing.

A strong business plan includes all of the following sections:

• An executive summary that introduces your staffing agency and briefly summarizes all other areas of the plan.
• A company description that includes your mission statement and what your company plans to accomplish.
• A product and Services section that briefly explains your unique staffing agency’s niche. This explanation includes answering how you will differ from previously established businesses in your area and how you plan to handle new assignments/clients and disappointed customers.
• A marketing plan that tells how you expect to find customers. Will you buy social media or search engine ads or rely on word of mouth? Will you attend any trade shows and pay for a booth? In this section, overview the marketing strategy for your staffing agency and tell what others in your area are doing and if you think it’s successful. Will you copy them or go a different direction? You should include a budget for anticipated marketing expenses.
• An operational plan that details in simple terms how you see yourself running the operation. How will you achieve your goals? How will you organize your staffing lists? Will you work from home or rent office space? What types of contracts will you provide your employees, and what types will you get from your customers? What is your fee structure?
• A financial plan that details your projected expenses and income for three years. You expect the business to grow during that time, right? Show how that will occur in weekly, monthly, and yearly increments.

Tax Classification

If you hire employees, this is an essential step. While employee tax classification can be tough for a staffing agency because of the ambiguous workforce status, simply remember that staffing agency workers are either employees or independent contractors. The distinction is essential because businesses are required to pay payroll taxes for employees but are not required to do so for independent contractors.

As a rule of thumb, you can issue a Form W-2 to employees and Form 1099-NEC to independent contractors. You should not get these mixed up because improper classification may result in penalties.

Business Bank Account

As a startup, it may be convenient to use your personal bank account for business transactions. However, as your business grows, you need to create a dedicated bank account for your company instead of relying on your personal one.

Here are some reasons why you need a business bank account:

• Some business structures like a limited liability company, limited liability partnership, or corporation require a business bank account.
• A business bank account lets you accept credit card payments.
• A business bank account adds credibility to your agency.

You can open a business account with almost any bank these days, and you can contact your existing bank to get started. The SBA also has a helpful guide for opening a business bank account.

Company Website

A company website lets you showcase your staffing agency. You can list what kind of staffing services your company offers and, most importantly, provide a way for potential clients to find you.

You should consider building a company website if you’re planning to cater to more modern companies that prefer to do things digitally. Plus, if you learn Search Engine Optimization skills (SEO), it can lead to organic growth and new clients.

Non–Disclosure Agreement (NDA)

This is another essential step if you have employees or business partners, as an NDA legally prevents your colleagues and employees from disclosing valuable business-related information to outsiders.

These contracts bind the signers from revealing sensitive information, such as customer data, pay rates, business strategies, patented technology, etc. Decide who you will expect to keep quiet about the way you run your staffing agency.

You might even include job applicants during the interview process.

Employment Agreement

An employment agreement creates the relationship between an employer and an employee. When you decide to hire someone, this will spell out all the rights and responsibilities of both your staffing agency and the new employee.

You might want to include work hours, hourly wage, timecard due dates, and what types of behaviors may lead to disciplinary actions.

Consulting Contracts

Before you send your employees to any job site, make sure these agreements are in place. These outline all the services your staffing agency and employees will provide to the client company with whom you will be working.

They also detail how much the client company will pay you for your services.

Job Application Template

If you’re planning on growing your staffing agency and hiring multiple employees, you might need to invest in staffing your own business. As a business owner, you have enough on your plate, and might not have time to find valuable, highly qualified employees. Invest in a job application form that will provide you with the information you’ll need to make the right hiring calls.

There are many free templates on the internet that include all the pertinent information, such as name, contact info, education, experience, and references.

Most templates are customizable, for example, you can add a personalized question or two to obtain the answers you need to make informed decisions.

Invoice Template

Now that you’ve done the hard work to get your staffing agency up and running, you want to get paid by your customers.

You will need to send them invoices with your company name and address, an invoice number, invoice date, and payment due date. You will also want to list a description of the services you provided, a unit cost, and the total amount for that account. You may also include some notes. The most important parts are the amount they owe you and the date you expect payment.

altLINE offers several invoice templates for business owners:

• B2B Invoice Template
• Staffing Agency Invoice Template
• Professional Services Invoice Template
• Small Business Invoice Template

If your staffing company experiences issues with cash flow and delayed customer payment, check out our information on payroll funding, a unique working capital solution tailored specifically to the staffing industry.

Staffing Agency Insurance Requirements

There are many ways your staffing agency can fail if you don’t purchase insurance, and you must pay out-of-pocket expenses for liabilities.

Staffing agency insurance requirements include the following:

• Workers compensation insurance
• General liability insurance
• Professional liability insurance
• Commercial property insurance
• Employment practices liability insurance
• Commercial auto insurance (if you have a registered business vehicle)
• Cyber insurance

Some of these policies can be bundled to save money. For example, business owner’s policy bundless general liability and commercial property insurance.

It’s important not to overlook the importance of obtaining insurance when opening a staffing agency. Running a successful staffing agency involves being prepared for worst-case scenarios. Any potential calamity could cripple or wipe out your staffing agency if you don’t have insurance. For example, if an employee sues you after getting into an accident on the way to or home from a job site, or if there’s a fire in the building that gutted your office, it might be impossible to recover financially.

In Summary: Requirements for Launching a Staffing Agency

Below is a quick recap of everything you will need to open your staffing agency.

Federal Requirements	State Requirements
Employer Identification Number	Articles of Incorporation
IRS Form 941	State Tax ID Number
Form W-4	City/County Documents
Form I-9	Business License and Certification
Insurance Requirements	Other State or Industry-Specific Requirements

Starting a staffing agency can be intimidating due to all of the paperwork. If you miss any of the above-mentioned documents, you may experience setbacks or receive penalties. That is why checking and re-checking whether you have all the documents needed is essential. And remember not to forget about the pivotal personal documents you’ll need, such as a business plan and non-disclosure agreement.

However, don’t let prevent you from striving for your career goal of opening your own employment firm. The staffing industry has boomed over the past few years, and you can make a fantastic career out of launching your own agency. As long as you put in the time and effort, you can find great success. Good luck with your staffing agency venture!

Requirements for Opening a Staffing Agency FAQs

Here are some common questions about opening your own staffing company answered:

Do you need a license to start a staffing agency?

You usually need a general business license to start a staffing agency if you only provide general labor positions. However, you may need specific licenses when providing temp staff for certain fields like medicine and finance.

How do I register as a staffing company in the USA?

You can register as a staffing company in the USA by applying for a business license with your state government.

Is owning a staffing agency profitable?

Owning a staffing agency is relatively profitable. Most temp employment agencies see a net profit of 3-10%, depending on the industries they serve and their price markups. Keeping staffing software expenses and operational costs down can increase this margin.