Setting up · Lesson 7 of 18 · 6 min
The administrative layer, ordered by when each item starts blocking you rather than by the order checklists usually put them in. Some of it can wait months. Two items cannot wait at all.
This is the part of starting an agency that every other guide covers, and it is genuinely the least interesting part of the business. It is also where a first placement gets delayed by three weeks because a certificate of insurance did not exist yet.
One caveat before the list. The specifics here — which entity, which cover, which registrations, at what cost — depend on your state, your vertical and the job codes your workers sit in. Anyone quoting you firm numbers on a web page is guessing. What follows is the sequence and the questions to take to your accountant, broker and attorney.
The entity
A company structure separate from you personally, formed in the state you will operate from. Which structure suits you is a tax question with a liability answer attached, and it is worth one conversation with an accountant rather than an afternoon of forum reading. What matters for the rest of this list is that it exists, because everything below is issued to the entity.
Employer registrations
If you will place contractors, you become an employer, and employers have to be registered as such — federally for payroll tax, and with the state for unemployment insurance and withholding. This is the step people discover late, because it is invisible until the first payroll run needs to happen and cannot.
Insurance
General liability and, wherever you employ workers, workers’ compensation. In practice this is also a sales gate: clients routinely ask for a certificate of insurance before they will issue a contract, and some name specific cover levels in their vendor requirements. Get quotes before you need them, because the certificate can be the thing standing between you and your first placement.
State-specific requirements
There is no federal staffing licence in the United States, but several states regulate employment agencies or temporary staffing specifically, and some require registration or a bond. This is the single most common place generic advice is wrong for a given reader. Check your own state, by name, and check whether your vertical adds anything on top.
The three contracts
A client agreement, a worker agreement, and clear written terms on fees, guarantee periods and who employs whom. These are not paperwork; they are where the money is decided when something goes wrong. Have an attorney draft or review them once, and reuse them.
Banking and back office
A business account separate from your personal one, and a decided answer to how payroll is run — in-house software, an outsourced provider, or an employer of record. Choose before the first placement, not during it.
Check yourself
A client says they will sign as soon as you send over your COI. What are they asking for?
Which of these becomes blocking first if you intend to place contractors?
Two risks worth understanding rather than delegating entirely.
Worker classification is the question of whether someone is your employee or an independent contractor. It is not a matter of preference or of what the worker agrees to — it is determined by the nature of the working relationship, and getting it wrong carries back taxes and penalties. If a worker is under your direction, on your schedule, doing your client’s core work, they are usually an employee.
Co-employment is the shared relationship created when you employ someone and a client directs their work. That is normal in staffing and not something to avoid; the mistake is leaving it unaddressed. Your client agreement should say who is responsible for what — supervision, safety, equipment, termination — rather than leaving it to be argued after an incident.
A brand identity. A website beyond a single page. An applicant tracking system. A careers portal. Business cards. Everything on that list improves work you are already doing, and none of it stops you trading — which is the test for whether something belongs in month one.
The client agreement gets a lesson of its own next, because four of its clauses decide whether you are actually paid: the client agreement, clause by clause — with a generator that drafts one with your own terms in it. Tooling comes after that, and most of it can wait longer than the people selling it suggest.
Key takeaways
In the United States there is no single federal licence, but several states regulate employment agencies, temporary staffing or both, and some require registration or bonding. Healthcare staffing adds its own layer through credentialing and facility requirements. Check your state and your vertical specifically — this is the area where generic advice is most likely to be wrong for you, and the answer is usually one phone call to the state labour department.
General liability is the baseline, and workers’ compensation is required wherever you employ workers — which, on contract placements, you do. Professional liability and employment practices liability are common additions, and clients sometimes specify particular cover levels in their vendor requirements before they will contract with you. Rather than working from a generic list, ask two or three brokers who write staffing accounts what your specific job codes and states require.
Three, at minimum. A client services agreement covering rates, payment terms, guarantee periods and liability. A worker agreement, which differs depending on whether the person is your employee or an independent contractor. And clear written terms on conversion — when a client can take a contractor onto their own payroll, and what that costs. Worker classification and co-employment are the two areas where new agencies get hurt, and neither is worth improvising.
When you place a worker at a client site, both you and the client exercise some control over them — you pay and employ them, the client directs their work. That shared relationship is co-employment, and it means liability can attach to both parties. It is normal and manageable, but it needs to be addressed explicitly in your client agreement rather than left to be argued about after an incident.
The company formation itself is fast almost everywhere. What takes real time is the sequence around it: employer tax registrations, insurance underwriting, and getting contracts drafted or reviewed. Any state-level registration adds more. The practical advice is to start insurance and registrations early and in parallel, because those are the items that stall a first placement while everything else is ready.
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Next: The client agreement, clause by clause
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