This is a fork with real consequences, so decide it explicitly at design time. Leads keep unqualified records out of the account model but create a conversion step and a matching problem. Contacts-only simplifies reporting and routing but pushes all hygiene work onto account matching and dedupe.
The deciding factor is usually whether you sell to accounts you can identify at first touch. Account-based motions with strong enrichment do well contacts-only; high-volume self-serve funnels usually keep Leads. Whichever you choose, the funnel definition and every downstream report must be rebuilt around it.
Every claim above comes from work LeanScale published. These are the sources.