The flag, the symbol and identity of a faction. Flags give a sort of "face" to your enemy, your friends/allies and helps identify your state/nation/faction amongst the sea of others. Not all faction owner's have flags, however. But if you plan on having one, think hard on it's design since it is the one you will use for the entirety of the faction's RP life. Although, If you don't plan to have a flag, it's a good idea to keep these tips in mind when deciding on a colour scheme for your ships as much of the same ideas and concepts here apply to ship colour schemes
So what makes a flag "good"? when you think of a flag in the real world, you may not realise it but you are analysing it for it's symbolism and complexity. Like anything modern, the general rule of thumb is "Less is More". Keep it simple, use a few colours as you can, while maintain a fairly decent amount of symbolism and story telling for the faction. Another good thing to note is NEVER use an acronym or any letters. An outsider, having never heard of the faction (both IRL and RP standpoint) may have very little clue as to what they mean and thus negating the main purpose of the flag, identifying the faction.
Symbols used varies according to the characteristics of your faction. Red is often associated with aggression and thus warfare, militarism, oppression and bloodshed. Blue is typically thought to be the opposite of red, peace, sanguinity, calm, liberation. White is for purity, harmony and peace. Black is for death, defeat and mourning. Yellow, wealth, prosperity, energy. Olive branches are also a symbol of peace, courtesy of The Great Flood from the Bible. Skulls are used in combination with the colour red, also for aggression, death, etc. If you are using language symbols to spell out some sort of word, make sure that language represents most if not all of the race/faction. For example, it wouldn't make sense for the UN flag to have only English on it, that implies that English countries are more notable and thus represents the countries of UN better.
Use of animals/ creatures. Based on the meaning of (North American) Aboriginal People's clans (based on what I know, correct me if I'm wrong); Bear means strength, snipe (a bird) is resourceful, wolf is trustworthy (man's best friend), turtles are respectful, hawks are cooperative, deer are perceptive, beaver are diligent, heron are friendly and the eel is caring. Your faction may be of another species. If they have their own form of wild-life, apply these kinds of characteristics to your chosen wild-life so they can be used in the flag
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Example. The UN flag. It is a symbol of peace, therefore uses the colours blue and white, which is fitting given their goal for greater peace, harmony and liberation of people from tyranny and oppression. The olive branches are also used. And an important note, No single country or continent is symbolised as the center of the alliance (is it classified as an alliance? organisation? idk)
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Example, WH40K Orks. While there is not single flag to represent all WH40k Orks, they all have a very similar appearance, notably the crude drawing of the Ork skull and massive jaw. As a species, Orks have very squat skulls, similar to primates, with large jaws. As a result, this skull and jaw accurately represents the entire race. On top of that, it is crudely drawn, which also represents the primitive and crude nature of Orks, having low intelligence considering they are somehow a space-faring species. Horns are sometimes seen on the skull. Given the primitive nature of the Orks, the horns are fitting since they harken back to a primitive age of civilisation relying on hunting. Other versions of the Ork flag may have red, symbolising their aggressive society, always on the hunt for warfare and willing to pick a fight with just about everyone no matter the foe
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While not a lot of factions use flags, I'm leaving it here for if future faction-makers have any thoughts about having a flag. Also good for RP in other games or general story-telling. I might add more but that's all I got for now