You may think running your own limited company is best for you, and you've got no fears or worries about form filling or meeting a string of deadlines throughout the year.

Great - you're not alone. Although the number of contractors trading in this way is reducing substantially every year, there are still a small band of workers who prefer this method. Here's some of the jobs to do when setting up your own company:

 

• Appointment of Director
• Appointment of Secretary
• Accounting reference date
• Registered office address
• Opening of business bank account
• VAT application
• Payroll scheme application
• Corporation tax reference application
• Accounting system
• IR35 status
• Shareholding structure
• Salary levels and expenses

Once you've set up your company and have started your contract, you need to ensure that you keep on top of the ongoing administration duties:

• You have to register your company at Companies House
• You have to file annual accounts at Companies House
• Annual Returns completed each year to update Companies House, requires an annual fee.
• HMRC must be told if the Company has any profits or taxable income in a Company year.
• You have to complete an annual corporation tax return and pay the taxes within a set time.
• Complete the following documents and return to Companies:
• Memorandum of Association
• Articles of Association
• Form 10 - Provides Directors' and Company Secretary's Names & Addresses, together with the Registered Company Address.
• Form 12 - States that the Company complies with the terms of the Companies Act

All limited companies must keep accounts and file accounts with Companies House.

Directors are personally responsible that the accounts are delivered on time, and can be penalised if the annual accounts are late.

Accounts must be produced to a set standard.

Annual returns (Form 363), it details the information held on its records. The details need to be checked, signed off and returned within 28 days with a fee.

Change of accounting reference date - Form 225, every company has an accounting reference date, which is the date to which the company's accounts are prepared each year. This date can be changed using Form 225.

Change of registered office - Form 287, every company must have a registered office: it is the 'home' of the company to which all official documents, notices and court papers have to be sent by law. The address must be a physical location, not just a post office box.

Change of directors and secretary and their details - Forms 288, Changes to any persons must be sent to Companies House within 14 days of the change.

Corporation Tax. This is the tax that companies pay on their profits. Your must send the taxman a Tax Return together with a copy of the accounts.

PAYE is the "pay as you earn" income tax that must be deducted from salaries before they are paid. This involves completing a PAYE registration form, keeping payroll records, paying PAYE & national insurance each month.

Companies must obey pages and pages of complex rules including tax law and company law. Ignorance is no excuse in the eyes of the law, not knowing a specific law is no defence. Unfortunately, there are dozens of other forms you may have to fill in - so professional advice will be required, at a price.

But before chasing these goals, you must first acquaint yourself with all the financial implications of going it alone. Professional independent advice at the outset is essential. Martin Bamford, of Informed Choice, the independent financial adviser (IFA), says: "Your IFA can perform a financial health check to ensure that you have considered all the most important areas. You should also work closely with an accountant to find out the implications of setting up your accounts.

"Finally, a solicitor will help you to draw up contracts and agreements. In a perfect world all three professionals should be talking to each other and you would appoint one to ensure that all three are working towards the same objectives. Professional advice comes at a cost but it is a small investment to ensure that everything is set up properly."

The first step is to decide on the type of business you are running. If you set up as a sole trader, you are classed as a self-employed individual. As well as income tax, you have to pay two types of national insurance: Class 2 contributions, which is a fixed weekly amount of £2.20 this tax year, and Class 4 contributions, which is a percentage of your taxable profits, equivalent to 8 per cent of annual profits between £5,225 and £34,840 this tax year, and then 1 per cent on profits above £34,840.

Another option is to set up as a limited company, which can protect your personal assets should the business run into financial problems. Company directors have various obligations, including filing statutory documents such as accounts and annual returns. You will also be liable for corporation tax on the profits of the company, including any interest and capital gains.

If you are self-employed or run your own business and your taxable turnover exceeds £64,000 this tax year, you also need to register for VAT. Revenue & Customs will normally collect this four times a year.

Whichever route you take, you must inform the Revenue within three months from the end of the month in which you began self-employment. Failure to do so could bring a fine.

By law, you must keep business records for at least five years and ten months after the end of the tax year to which the records relate. The Revenue can charge up to £3,000 for each failure to maintain or retain adequate records.

Business and personal records must be kept separate, and most businesses find that it helps to have a separate business account. Your records should include any sales, with copies of any invoices you have issued, and a record of all business purchases and expenses. You also need to keep details of any amounts you personally pay into or take out from the business, as well as copies of business account bank statements.

Another key point to remember is that you will no longer have the security of any benefits that were provided by your employer, unless you arrange them yourself. These may include pensions, life assurance and private medical insurance.

Jerry Mcloughlin, of Punter Southall, the IFA, says: "Depending on your circumstances, all these may still be necessary. Through an employer, such benefits are provided at low cost, often without medical underwriting. But for individuals they will be more expensive and subject to medical underwriting."

Leaving employment can also mean the loss of death-in-service benefits, which can be as much as four times your salary. This is a substantial life assurance benefit that you should consider replacing.

Mr Bamford says: "Term assurance is the cheap and simple way of replacing a death-in-service benefit. You can pick the sum assured and the term of the policy to suit your intended retirement age."

Pension provision is also vital, as you will no longer benefit from an employer making contributions into an occupational scheme. Philip Pearson, P&P, another IFA, says: "For many self-employed people, a stakeholder pension is a simple, good-value route to establishing a pension fund."

Where to find help

Phone the HM Revenue & Customs helpline on 0845 9154515 or visit its website, www.hmrc.gov.uk, to register as self-employed and to file your tax return online.

Business Link is the Government's service for the self-employed, offering advice on everything from buying to selling a business.

Phone 0845 6009006 or go to www.BusinessLink.gov.uk.