Forms, Documents, and Government Requirements for Starting Your Own Staffing Agency

regulations and compliance

Last Updated on October 10, 2023

Are you planning to start your own staffing agency? If so, the first thing you should do is learn the requirements and paperwork required to do so, as there are several steps to complete before getting started.

Figuring out what you need to start a staffing agency is the first step of hopefully many in terms of running your business successfully. Therefore, read on for a list of all the paperwork you need to start a staffing agency.

What Is Required to Open a Staffing Agency?

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.

But starting a staffing agency requires much more than just the basics of forming a business entity and obtaining insurance. Below are some of the essential legal and business documents you need to operate a staffing agency legally.

Important Documents and Forms Every Startup Staffing Agency Needs

We can divide the documents necessary to build a startup staffing agency into 3 categories:

  • Federal documents
  • State documents
  • Personal documents

In addition to these three, you may also need miscellaneous documents, depending on where your business is incorporated.

1. Federal Documents Required for a Staffing Agency

First, you’ll need to put together your federal documents. Here are some of the most important to keep in mind.

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.

Applying for an Employee Identification Number (EIN)

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.

2. 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.

3. Personal Business Documents for a Staffing Agency

A few of these documents aren’t required to form 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. Ask your current bank about a business bank account to get started.

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.

Business Insurance

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. The most successful staffing agency owners have 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. Be prepared.

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:

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.

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.

Check out your state’s website for more information on these licensing requirements and how you can address them.

Key Takeaways

Starting a staffing agency can be challenging due to all the paperwork necessary. 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.

Fortunately, staffing is a fantastic industry to enter as long as you devote the time and effort to grow your business. Good luck with your staffing agency venture!

Starting Your Own Staffing Agency FAQs

Here are some common questions about starting 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.