My naive initial assumption (just due to my own bias) was that nesting would work the same way as in Markdown – i.e., that the number of `#`’s indicates the heading level.

Maybe worth for you to consider? It’s a well known convention, it should be fairly self-explanatory, and it would work independent of the notion of paragraphs.

    # animals
    elephant
    ## felines
    cats
    # plants
    apple tree
    ## flowers
    lily