I have actually done it both ways. Once I made an ocean wave and decided to stitch sea shells in the open spaces and another time I made squares and put them in a quilt. The only difference I found was that the quilt top that was made was a do at home only. At least if you do the squares first, it's portable. I also was able to back the embroidery in the squares. But I did make them larger than needed so I could hoop them.