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I am deploying a small farm and am going to be using a taxonomy. Should I create a new Managed Metadata service application instance or just use the default? What are the advantages/disadvantages?

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There isn't any advantage or disadvantage of using the default one created by the wizard vs. one you create. You will have all the same functionality.

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A new one should be created if you want certain web apps to have their own set of service apps. By grouping service apps you can allow for instance a web app to use the metadata service app and search but not the BCS by creating a new metadata and search service app and putting them in a new group and then assign the web app to that group.

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Just create a new Group and term sets in the existing itself and work it out.. as everything remains the same.

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