Cloud Firestore and data modeling: From RDBMS to No-SQL
Use solution 1. Guidance on nesting vs not nesting will depend on the N-to-M relationship of those entities (for example, is it 1 to many, many to many?).
If you believe you will never access an entity without accessing its 'parent', nesting may be appropriate. In firestore (or document-based noSQL databases), you should make the decision whether to nest that entity directly in the document vs in a subcollection based on the expect size of that nested entity. For example, messages in a chat should be a subcollection, as they may in total exceed the maximum document size.
Mongo, a leading noSQL db, provides some guides here Firestore also provided docs Hope this helps