So after seeing a certain confess, I really got thinking on how the guilds work and felt I have found a level of how this system works and please bare with me through this.
So let’s start at the top and work our way down, and at the top of the magic world is the Magic Council. The magic council seems to regulate and look over every guild in all of the continent of Ishgar. The Magic Council is located in Era, a city that we’re never given an actual location of but is presumably not in Fiore given the Magic council of a branch specifically for Fiore. All of these branch building are likely located in the countries in league with the magic council. The Magic Council exists mostly to regulate and preside over, wizards in guilds so they can have order and not fear a bunch of super power nutcases with magic to act on their own. They also now have the power to enforce their laws with the Rune Knights, their personal military. But these guys seem to only be used when dealing with an international threat, like Jellal who invaded the council, and just let the police force of the country handle it themselves.
The Magic Council, while I did say is at the top, can be over turned by the countries government, meaning that even though the council controls all the guilds and makes their rules, the kingdom in which the guilds are located in can also take advantage of them as they are citizens of the country. An example would be the king of Fiore asking all the guilds to participate in taking down the dragons is request directly from the king, no need for council decree. Another example being the carbuncle guild being ordered by the prince of veronica to capture the phoenix stone. The magic council would probably scold them for taking a mission not licensed by them but they are mostly off the hook as this job was requested of the monarch himself.
Underneath the magic council you have the guilds working inside the respective countries of Ishgar. In the country of Fiore we have many guilds and it makes sense. Each of these guilds mainly handles a job in a certain area with each of the guilds operating out of a city, like Fairy Tail in Magnolia, Lamia Scale in Margaret, Phantom Lord in Oak town, etc. This way we can bring all the mages of one area together and have them solve the problem of that area, I mean were not going to have, say, someone who lives thousands of miles away from the guild building have the job request sent to them instead of one in the closest area. With jobs there seems to be an equal distribution based of strength and prestige of the guild. A guild with more members and stronger wizards are likely to get more jobs sent to them than ones with few members. Also these guilds seem to reflect the areas they cover as many of their home cities will also treat them like hometown heroes. The guilds and the area they represent seems to be a big deal as maintaining a good relationship with where they’re stationed is shown when the guilds openly participate in towns with things like the harvest festival in Magnolia and the thanksgiving festival in Margaret.
While the guilds do seem to cover an area a piece, they do have guild master conferences which allows them to meet up and exchange what’s been going on in their neck of the woods. This is probably a good way of taking, say, an escaped prisoner who’s recently gotten out of the area look over by one guild into another, with these meet ups they are able to make each other more aware.
An under the guilds we have the standard mages. In the world of FT we know magic is a common thing in everyday like, people own glasses that lit them read faster, they can change the color of their clothing with magic, and they talk on “phones” made of magically charged lacrima. What sets the wizards apart from that is they want to hone this craft. While that mostly means make their magic strong it still is an incentive to go out and join a guild. Also, as said by lucy, you’re not really considered a full fledged wizard unless you join a guild, which makes the mages want to join guilds in pursuit of mastering their craft.
It seems a big reason guilds exist is to round up all the mages of an area and keep tabs on their activities. We see that even while a mage who doesn’t live the area near the guild they join, they still do and through being in that guild it allows someone to keep track of you. With all these magical yahoos concentrated in certain areas of a kingdom, it not only helps the kingdom keep them under control but also gives sway over a large amounts of wizards in the continent.
The world of Guilds is something not explored all that much and that’s a shame. This world is interesting and deserves to be fleshed out. This post was mainly me writing how it seemed the government of guilds functioned given what we’ve seen.