Setting up a limited company in 3 simple steps

Fortunately, a limited company is not hard to set up. It only takes a few basic steps, and they're not difficult - getting freelance work is a lot harder than this for the average contractor.

The primary forms you'll need to fill out are Form 10, which identifies your limited company and its initial directors and officers (frequently just the freelance contractor himself plus one other), and Form 12 - which declares your intent to file the company. Both of these are available directly from Companies House.

Once these two forms are filled out, your limited company will need a Memorandum and Articles of Association. While there are standard forms of these on record which may be adopted with little effort, the average freelance contractor would likely find the conditions onerous - and should generally instruct a solicitor to prepare something more in line with their needs.

Once all these documents are prepared, they need only be filed with the Companies House and the fees paid (at the time of writing these are £20 or £50 for same day registrations). The contractor may continue to freelance in the meantime, while the limited company is registered and a certificate issued.

After about ten days, you will receive your certificate, which will then enable you to obtain a business bank account in the name of your new limited company. As a freelance contractor, you may or may not provide services covered under VAT; if so, you will want to register your limited company for VAT with HMRC.

While the process can seem daunting at first, forming a limited company takes only a small amount of trouble and expense... even when one considers the cost of a solicitor to prepare the Articles of Association. The credibility it lends to a contractor - who is no longer just freelance, but owning and running his own business - is essentially priceless.

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