Reseller account:
Pros:
* you only have to handle account creation, client support, and billing. (And your hosting site maintenance, advertising, and all the other day-to-day details that go along with running a business.)
* smaller initial cost
* do not usually require a 30-day notice to cancel
Cons:
* you may not know how crowded a server really is - and even if you did, you have to rely on your provider not to overcrowd the server
* you don't have root access, so you can't install any modules or software you want.
* you (and your customers) aren't the only ones on the box. If someone else installs an insecure script, your customers may be at risk and you can't directly do anything about it.
* some people have a real attitude toward reseller hosts - "they aren't real web hosts". More of a psychosocial problem than a problem of your ability to provide your clients with quality hosting. (Web host bigotry, if you wish.)
Dedicated server:
Pros:
* you are in total control. You set package limits, you control what types of clients are on your server (and how many), you install whichever control panel you want, et cetera.
Cons:
* larger initial cost, and larger ongoing cost than a reseller account. Starting on a dedicated server could lead to a longer period before you're able to show a profit.
* more maintenance and attention required - either you have to monitor your server, or you have to pay someone else to do so (additional cost)
* many servers require a minimum 30-day notice to cancel
There are more comparisons / contrasts to be made between managed vs. unmanaged servers, leased vs. colocated...but there's one view of the pros and cons of hosting reseller account versus a dedicated server.
I didn't list some points, like the disruption in moving from a reseller account to a dedicated server (once you've outgrown that phase) because the disruption will occur: whether you move from a reseller account to a dedicated server, from one reseller provider to another, or even from one dedicated server to a new one (hardware replacement/upgrade), there will be disruption.
There's also the issue of having a good relationship with your upstream provider. You have to trust that this outfit is going to give you all the tools you need to provide quality service to your customers:
* quality hardware (unless you colocate, this is an issue. Do you trust that they're buying quality hardware, and keeping it in good running order?)
* a secure network
* uninterrupted power and connectivity