Should I set up a subdivision or have a LLC or corporation own another LLC? Don't plan on going into real estate

Many entrepreneurs put separate lines of business in separate entities (LLCs or corporations) precisely for the reason you identified:

You don't want failure of one business to destroy the other business.

You should work with your tax advisor to come up with the most tax-efficient approach given your personal financial situation and the businesses' respective financial prospects, then work with a lawyer to make sure the entities are set up properly. (You don't want your hard work and money to go to waste because you messed up the formation process.)

This information does not constitute legal advice and does not establish an attorney-client relationship.

An LLC can be treated as an s-corporation for income tax purposes. For federal purposes that would require two elections: first elect to be treated as a corporation and second elect to be treated as an s-corporation. An s-corporation can have subsidiaries.

I'm not sure what you mean by courts not liking LLCs owning other LLCs. Provided that it wasn't done for some improper purpose, like defrauding creditors, there shouldn't be any objection to an LLC owning another LLC.

You should consult with a business attorney before you take any steps that, in retrospect, you should have avoided.

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Setting up multiple corporations, LLCs, or limited partnerships, with one owning some portion or all of the multiple corporations allows you to own an interest in all of the corporations and still keep the liability limited to the one that has the legal, tax, or other problems. However, This is again tricky and you should hire a good lawyer to see to it that it is set up properly.

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Instead of over-complicating your life, you might substitute appropriate insurance (with perhaps an unbrella policy) for all these layers of entities. Further, it is not the number of layers and or entities but whether or not they are properly formed and maintained (and most aren't because if you form an entity through some online service, invariably your equity, stock or membership interests, will be improperly issued.

An LLC taxed as an S corp can own entities and be owned by entities.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.