Definitely set it up properly as a Ltd, Sole Trader status can get you into all kinds of a mess if the worst case happens! (liability of monies owed to creditors etc)

Have you searched around on the net? There must be loads of sites giving advise. (the government do a lot for small businesses as do banks - so it might be worth contacting them)

Make sure you do your maths so you can afford to live on a negative income from your part whilst the company gets going!