Setting up a company only takes a few simple steps and as a contractor it can often be harder finding freelance work that it is setting up a limited company.
You will firstly need to fill out a couple of forms which are both available from Companies House. These forms are Form 10 which will identify the limited company as well as the directors and officers, and Form 12 which declares your intention to file the company. Once you have completed these forms you will need a Memorandum and Articles of Association
Once preparation of all these documents is complete then will then need to be filed with Companies House and the relevant fees paid. While these documents are being filed a contractor can still carry on working as a freelancer and can do so up until the company is registered and a certificate issued. You should receive your certificate after about 10 days and this will then enable you to open a business bank account that will be in the name of your newly registered company. You may need to register your company for VAT with the HMRC is you are going to provide services covered under VAT.
The main benefit of setting up a company is the credibility it adds to a contractor as it shows they are no longer freelance, but instead owning and running their own business and this added credibility is priceless.