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Originally Posted by knuckler
Vector based programs(i.e. Illustrator) will allow you more creativity and logos made with them won't suffer as much when they are shrunk. Programs like photoshop and paint shop pro are still solid programs if you are working with existing images. There are free programs in each category:
Gimp is similar to Photoshop:
http://www.gimp.org/
Inkscape is a free vector program:
http://www.inkscape.org/
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What he said ... at present, I do all my logos in Coreldraw, a vector-based program. My logos -- for the most part -- are re-creations or entirely original which means I draw them from scratch in CD. Most re-creations are usually inspired by things I've seen elsewhere, but I still draw the elements, though sometimes I do import some objects (clipart).
Checkout my logo display ... link below ... for some of my work.
So depending what direction you want to take, that will determine what program you want to use. Good luck and have fun with logo designing ... it's rewarding and the community here is absolutely one of the most supportive I've been part of!