Exceeding the Duchy limit, Kingdom Titles and when to create or not create titles?

This situation is sort of discussed here: What's the benefit of destroying titles?

Multiple titles has several pros and cons.

Pros:

• More prestige (most if you keep them, but also if you hand them out to vassals).
• If you hand out titles: more powerful vassals - they are more capable of doing stuff themselves. A Duke vassal might be able to carve out new land for himself and you.
• With more duchies to hand out, you will have fewer vassals to worry about.

Cons:

• More discontent among your vassals. If you exceed your demense or duchy limit, they will be angry with you.
• De jure vassals will be discontent if you have more than one primary title. they will "desire" it. An ambitious count will get very, very discontent, if you have a higher level title that he wants. See more here: What determines when the ambition penalty triggers?
• If you hand out titles, your vassals will become more powerful, and more of a threat to you.
• Potential succession problems if you have more than one top-level title. The crown laws are separate of eachother, see. Since you created the kingdom, it starts with the same laws as your primary, but it will be tougher to change them. If you are gavelkind, your realm will split, no doubt.

As you can see, it seems having more titles is a very bad idea ... and that is often the case. Most of the time, you will only want one top-level title – at least for Kingdoms and Empires.

However, in some cases, you might want to create or usurp titles, simply to get de jure claims. This is not without problems, though, so make sure you are running a stable operation. People will get discontent when you are hogging all the titles for yourself.

It's also often a good idea to keep your vassals weak, thus reducing the risk of them toppling you. When you have a small realm, it's fine to have a bunch of count vassals. It might not even be a problem if you hold too many duchies or exceed your demense limit. However, as your realm grows, it will get very hard to keep 200 single-holding counts happy. The more duchies you hand out, the less people you will have to keep happy.

If you want your realm to grow, you might also hand out duchies, so they can claim territory outside your realm (hopefully you've set your crown authority to medium or higher). Keep an eye out, though, so they don't get too powerful ...

For huge empires, you might even have several king vassals.

Of course, more duke/king-vassals also means, that once they do revolt against your regime, it will be much harder for you to defeat

In the newer updates, there is also a vassal limit. In this case, you are forced to create duchies (and kingdoms) and distribute power more.