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Starfleet usually does not group ships into Squadrons, save in military or principally defensive patrol functions. When it does so, it usually builds Squadrons of 8 to 12 ships, and usually in Divisions of four ships.
Division command is usually given to the senior officer of a ship in the Division, and sometimes, an officer of higher rank than the typical CO of a class of ship is given separate command of the unit. If a Division is expected to operate independently, then that Division CO will be given a small planning staff and assigned an actual ship commander, who will normally be designated Division Flag Captain.
Usually 2 to 3 Divisions are assigned to a Squadron. Squadron command may be held by a senior Captain or a Fleet Captain/Commodore. Usually Squadrons include a separate planning and management Staff under an officer assigned to a Squadron Flagship. And the CO of that Flagship is designated as the Squadron Flag Captain.
Chain of command is derived from the Squadron CO, and moves to the Chief of Staff, for all planning purposes. A similar chain of command evolves for a Division, though usually the Division Flag Captain takes over the functional command of the entire Division in the event that any separate Division CO is unable to command.
This Chain of Command may leave an inferior rank offricer in command of units commanded by higher ranking officers. In the event of this occurrence, the Chief of Staff may designate another Senior Officer as active combat commander, and move to only a planning and management role, but retains overall responsibility for group command.
If both a unit CO and Chief of Staff cannot command, the Flag Captain takes over the unit until a new chain of command can be worked out among surviving command officers. Such decisions can be made without Starfleet Command authorizations but are subject to formal review later.
If a ship is lost, holding the Unit command team, then the most senior officer commanding, will be designated as the new Unit CO until decisions in times of relatively little stress can be made to designate and support a new command structure. Again, these decisions are open to formal Starfleet Command review, later.