The domain limit only refers to top-level domains. Subdomains are unlimited. Any domains that exceed the specified limit will result in a error or, in cPanel and Plesk environments, will revert to Apache.
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Having played with moodle we have decided to use it for our school. However, I am unsure whether to set up a web server in our school or use a web hosting company to host it. We will have users, with around 35 courses.