As boxtops says your first step should be an AUP (acceptable use policy) for internet use, without it you can block the sites but have no recourse if your staff find a way round the block.
You've not actually given any details about how your company is connected to the internet, I will assume by normal ADSL. if that is the case then most ADSL routers have limited site blocking features and would be the easiest place to start, however this won't help with blocking downloads.
To fully secure the place you really need to put another box in that controls your internet connection and operates as and invisible proxy server with full content filtering and virus scanning in place, most of the good options for this are going to cost you a yearly subscription in the same way as your desktop anti virus does to enable you to keep the AV engine up to date.
I have personally used a bit of software called clearOS (formally ClarckConnect) to control the internet in several small companies with great success. all you require is an oldish PC with two network cards to install it on.
http://www.clearfound...oftware/overview.html
(and although I realise that this site is not meant to be used for advertising if you happen to live in or around Essex I may be able to offer my services to help you in this)