Trading through a limited company gives you a number of advantages. It enables you to involve other investors in the business in a structured way, it means you can defer taking income from the company until it suits your tax planning, and it provides you with a potentially clearer exit by selling your shares in the company. But running a limited company brings with it legal responsibilities and you need to be sure that you are aware of these.

If you treat the company finances as your personal bank account you are almost certainly going to find yourself in difficulties. And if you miss out on deadlines set by Companies House or HMRC, there will be potentially serious consequences. So you need to carefully weigh up the pros and cons before setting out.

At present there are tax advantages in the UK to trading through a limited company compared with being self-employed. But you need to have a reasonable level of profit in order to realise these gains and you need to be aware that tax rules change regularly. So it is always wise to form a limited company because there is a clear business case for doing so, rather than for what may prove to be a short-term tax gain. Make sure you do your research carefully, obtain professional advice and do the calculations.

To get started you need to form a company with Companies House. Most people use an accountant, solicitor or company formation agent rather than do it themself. You have to decide who will own shares, who the directors will be, whether or not you will appoint a company secretary and where the registered office is going to be. All of these questions have an impact on the running of the business so make sure you know why you are doing what you are doing and obtain the appropriate professional advice.

The company must prepare accounts to the end of its accounting year, together with a Corporation Tax return, and also complete an annual return to Companies House showing the shareholders, officers and registered office of the company. Dividends should be properly issued and paid with the appropriate board resolution and dividend certificate.

If you have good systems, you ought to be able to fulfil your legal obligations routinely and concentrate on making money from your business. Many people run successful companies with helpful advisors working with them and without any problems. Others struggle, largely because they are neither good at listening to advice nor careful in their records keeping. So please do your research, choose your advisors carefully and take a businesslike attitude to the new venture. If you do this there is no reason why you should not succeed. Good luck!