The simple answer is yes, it is far better to start small and transplant to larger containers as needed.

It is a common question so there is much reading to do on the issues associated with what is called 'potting up'. But basically it boils down to 4 reasons. 1) large containers retain too much water and cause root rot for the young seedling's tender roots. 2) Seed starting mix is very different from growing mix when it comes to both water retention and nutrients. 3) Root development tends to be very shallow in too large a container. 4) The act of transplanting itself stimulates the development of the needed fibrous feeder roots. This is usually considered the most important reason and is especially important with tap root plants.

The number of transplants varies. 1 transplant at least is minimum and the standard is 3 with #3 being into final growing place. But 4 is also common practice with commercial growers doing 3 prior to sale and #4 is to the garden.

Dave

However, if you are trying to grow plants that resent transplantation like squash or root vegetables you can easily start them in the pot in which they will grow. I just make sure to use a very well draining mix so that the medium is never soggy. The other technique you can use is a two layer system where you have a fertile growing medium on the bottom and a fine seed starting medium in a thin layer on the top.

thank for the quick response. and off topic, but is it recommended seeds be started in a seed starting tray like a small dome with a heating pad?

The use of domes is hotly debated. They are not used by commercial or professional growers but have some limited advantages for beginners. But they must be removed promptly as soon as the first seeds sprout to avoid problems. Lack of proper air circulation over the young seedlings quickly kills them.

Why not check out all the FAQs here? They cover all the basic questions quite well.

Dave

Here is a link that might be useful: Growing from Seed FAQs