working on logical separation of Splunk cloud and Splunk observability cloud for one of the Business units, looking for some recommendations
What exactly are you trying to do? Splunk Cloud and Splunk Observability Cloud are two different products so they already are "separated".
we are planning logical separation in both separately.
that means BU Separation in Splunk cloud and BU Separation in Splunk Observability Cloud
I'll presume by "BU separation" you mean preventing one BU from seeing/accessing the data and objects owned by other BUs. This is accomplished in Splunk Enterprise and Splunk Cloud by role-based access control (RBAC). Each BU gets their own set of roles and only those roles may access the BU's data/objects.
I can't speak for Splunk Observability Cloud, but it probably has a similar feature.