How does one go freelance?

Thanks to a lovely blogger friend of mine (who says blogging gets you nowhere?) I have now embarked on the strange and interesting world that is freelancing, for one major employer (spending weekdays in ol' London town - come and say hi!) doing some online editing and writing, which is nice.

It's a bit of an eyeopener into the way that "real" publishing works, and I've got some stuff to learn but as the Amerikanski would say, It's All Good.

However, the vexed question of my official status and how I should be paid has arisen. Should I:

- go completely freelance, and just invoice the company direct, and sort out tax and National Insurance at the end of the year? The slight flaw being I'm not sure i can be a "sole trader" if I'm just working for one employer.

- go on their payroll as a casual? Easiest option, but least lucrative I guess...

- employ an umbrella company to be the middle man for sorting out invoices and the like...

What do you think?