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Hello,
First, you should clearly outline in your Terms of Service what is allowed and what is prohibited when using your service. Additionally, specify that the user is responsible for the content they publish, etc. This is something you should discuss with a lawyer, but it is a crucial point. Moreover, if you receive complaints about content or a server, you can always notify the client to remove the content or suspend the server if it is being used for DDoS attacks.
Tor hosting is totally legal in most countries.
Illegal content, well, is illegal, if it's illegal in the country where the server is located.