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Usually a Federation or Federations of States or even a Confederate; Also known as Composite state and Or state. A compound state is a state that includes one or more sub-states. It is the main differentiating factor between traditional state machines and state charts. A compound state can be thought of as containing its own state machine. States can contain more states, also known as child states. These child states are only active when the parent state is active. Child states are nested inside their parent states. Parent states are also known as compound states. The term. Parent states refers to political units that have international standing or legal recognition respectively. De facto states are basically regarded as political authorities functioning. within a certain territory, but lacking international legal recognition.