Governmental Requirements to Start Your Own Staffing Agency

When I talk with staffing entrepreneurs about how to start a staffing company, the first questions are usually about finding clients, choosing a niche, or picking software. Those are important, but the truth I share right away is that the biggest early wins come from getting your government and compliance foundations right. 

Common misconceptions I see 

• “I can form an LLC and start placing people tomorrow.” 
  • Not quite. Depending on your state and niche, you may need local registrations, permits, and even industry-specific credentials before you open your doors. 
• “Insurance can wait until I’m making money.” 
  • For staffing, insurance (including workers’ comp) is often legally required from day one—especially if you’re the employer of record. 
• “Payroll taxes are my clients’ problem.” 
  • In most states, temporary staffing agencies are considered the employer, which means you’re responsible for withholdings and unemployment taxes. 
• “EEOC only applies to big corporations.” 
  • Once you cross 15 employees, federal EEOC requirements kick in, so plan ahead. 

Aside from the regulations you need to follow, how to start a staffing company is relatively straightforward when you have the right guidance. Here’s what I would do if I were starting a staffing company tomorrow to set up a compliant and resilient operation. 

Create Your Business 

Start by formalizing the business. Research the local requirements in your state and city or county (these can vary), then register with the Secretary of State and, where applicable, the county clerk. If you plan to place talent in regulated niches like healthcare or legal, you’ll want to look into any additional licenses, registrations, or certifications those industries require. 

Many states and counties have small business development offices that help new owners navigate forms and fees. The U.S. Small Business Administration is also a reliable starting point. For anyone asking how to start a staffing company the right way, this legal foundation is non-negotiable. 

Gain Business Insurance 

To remain compliant and protect the company, you should make sure your insurance stack is in place before placing a single candidate. At a minimum, staffing agencies typically carry: 

• Commercial (business) insurance 
• General liability insurance 
• Workers’ compensation insurance (often mandated when you’re the employer of record) 

Because limits and requirements vary by state and by client contract, plan to sit down with an experienced insurance agent to tailor a policy that fits my risk profile and legal obligations. 

Know Your Tax Plan 

Tax surprises are never fun. Before launch, confirm obligations with a tax attorney or accountant. In most states, temporary staffing agencies are treated as the employer of their temporary employees. That means you’re usually responsible for: 

• Payroll taxes (withholding and remittance) 
• Social Security and Medicare (FICA) 
• Federal income tax withholding 
• Federal and state unemployment taxes (FUTA/SUTA) 

After registering the business, the state issues a state tax identification number. You’ll also obtain an Employer Identification Number (EIN) from the IRS for federal tax administration. Getting this right is central to how to start a staffing company without compliance headaches. 

Learn EEOC Requirements 

Once your agency employs 15 or more employees, you must comply with Equal Employment Opportunity Commission (EEOC) guidelines that ensure a fair and equal workplace. That includes obligations under laws like the Americans with Disabilities Act (ADA), among others. 

You’ll want to train your team on nondiscrimination, accommodation processes, and compliant job advertising and screening. Both the agency and individual employees can face legal consequences for violations, so proactive education and documentation matter. 

Consider Payroll Funding 

Once you’ve covered the governmental requirements of how to start a staffing company, the next step many successful agencies consider is payroll funding. While not a legal requirement, payroll funding can give your agency a strong financial backbone by ensuring you can pay temporary employees on time, even if clients take weeks to pay their invoices.  

This added stability not only keeps your workers satisfied but also helps your agency build credibility and scale more confidently. In short, payroll funding isn’t mandatory, but it’s a powerful tool for creating a resilient and growth-ready staffing operation. 

One Step at a Time 

If these steps feel complex, that’s normal. How to start a staffing company the right way is about pacing yourself and building a solid compliance backbone, entity formation, insurance, taxes, and EEOC, before you scale sales and recruiting. You don’t have to navigate these new waters alone. See how our team can streamline your path to staffing success.  

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How to Start a Staffing Company FAQs 

1. What are the legal requirements to start a staffing company?
   The legal requirements vary by state and sometimes even by city, but most staffing companies must register their business, obtain an Employer Identification Number (EIN), secure appropriate business insurance, and comply with tax and employment laws. If you place employees in regulated industries like healthcare or legal, you may need additional licenses or certifications.

2. Do I need insurance to start a staffing company?
   Yes. Business insurance is a critical step in starting a staffing agency. At minimum, most agencies need general liability insurance, commercial insurance, and workers’ compensation coverage. These policies help protect your business from liability and ensure compliance with state and federal regulations.

3. Are staffing agencies responsible for paying payroll taxes?
   In most states, staffing agencies are considered the employer of record for their temporary workers. That means you’re responsible for withholding and paying payroll taxes, including Social Security, Medicare, unemployment taxes, and federal income tax withholding. It’s best to consult with a tax professional before launching your agency.

4. Is payroll funding required to start a staffing company?
   No, payroll funding isn’t a legal requirement. However, it can be a powerful financial tool that allows you to pay employees on time while waiting for client invoices to clear. Many staffing entrepreneurs use payroll funding to maintain steady cash flow and scale their businesses more confidently.

 

VIDEO: Insights for Requirements to Start a Staffing Agency