A clan is a more formal orgainzation of a group of characters. This could range from people with similar goals down to just people of a similar class or race.
Clans are run by players themselves, one or more of whom serve as the leaders of the clan. The clan heirarchy is defined in terms of ranks, of which there can be 7. The lowermost rank serves as a 'petitioning member' rank (rank 1). This is the rank where new members start. The highest rank (rank 7) was reserved for immortal 'overseers', who now set up the clan structure, but are otherwise uninvolved in clan activity. Rank 6 serves as the highest mortal rank, and is thus the rank of the clan leaders. Rank 5 has leadership abilities associated with it as well. Ranks 2-4 remain as intermediate rankings for members.
A leader (rank 6) or lietenant (rank 5) can perform certain clan administration functions, such as adding new members, removing members, promoting members, and demoting members.
The process by which a player becomes a clan member is as follows. The clan leaders or lieutenants first add the player to the clan as a petitioning member. The newly added player may then 'join' the clan officially to become a member of rank 2 (a recruit). From there the clan leadership may promote/demote the member as they see fit.
All clan members have a status called their 'known to rank' status. This defines what rank of clan members know of a player's membership in the clan. For instance, if a member is only known to rank 5, only clan lieutenants, leaders, and overseers will hear clan tells from this member, or see this member listed on the clan who list. By default, members are known to all ranks.
It doesn't cost anything to start a clan with this structure, but to have a clan hall that will be a private area your clan can use for a base of operations will require some cash. This money isn't as hard to come up with as it seems if you have a group of people working towards that goal.