Forming a limited company will provide access to a number of tax planning strategies and limited liability status. Although there is perceived prestige in operating as a limited company you will lose some of your privacy - directors' and shareholders' personal details and abbreviated accounts have to be filed and are open to public scrutiny.
A limited company is a distinct legal entity that is able to enter into contracts in its own name. The fact that the company is a separate legal entity from its owners is very important as it means that all the company's liabilities are the responsibility of the company - not that of the directors and shareholders!
The only exception is if you, as director of the company, offer a bank or other creditor a personal guarantee to repay the company's debt. In that instance you then become personally liable to repay the debt if the company is not able to.
So what are the pros and cons of incorporating your business?
Audit requirement - If your company exceeds certain turnover limits, or is in a particular trade sector, an audit may be required thus incurring further costs. We can advise on this, but most small companies will be exempt from annual audits.