Very excited to be back for Endless Legend 2! As the game is in Early Access, this guide is a work in progress. I'll keep updating it throughout the EA period. If you notice something has changed in a game update, let me know.

In Endless Legend 2, Minor Factions work largely the same as in EL1.
Most Territories of the map will contain 1 or 2 small Villages that are controlled by what is called a Minor Faction. These factions are not Empires, they are small groups that will help or hinder your progress in the game.
Most Minor Faction Villages will be Hostile to you by default once the game starts, and unless their Villages are dealt with, they will spawn Roaming Armies that may attack your Units. Hostile Villages are denoted by the lightning bolt next to their icon. Minor Factions that are only considered "Wary" may not attack you.

There are 3 ways to deal with a Village, to achieve what is called Pacifying the Village:
-BRIBE: One of your Armies can interact with the Village and pay an amount of Dust to Pacify that single Village. If there is more than one Village in the Territory, you will have to Bribe each one individually.
-PARLEY: Your Army can speak with the Village leader to obtain a quest. Completing the quest will Pacify ALL Villages in that Territory.
-ATTACK: Starts a Battle with the Village. If you're victorious the Village is Sacked, leaving it unable to spawn any more Roaming Armies. The Village can be rebuilt later through a City's production menu if the Territory is settled (by clicking the tile the Village is on while in the City screen), and will be Pacified once rebuilt.
Pacified Villages will not spawn Roaming Armies, and will give certain advantages to your Empire if the Territory is settled and the Minor Faction is Assimilated (more on those perks later). Existing Armies of that Minor Faction in the Territory will no longer attack you once the Villages in the region are Pacified. Once Pacified, you can also no longer Attack the Village.
Generally, Parley is the best option. Unlike in EL1, Parley no longer requires a Technology to perform, so the action will be available to your Armies from the start of the game. The quests generally aren't too difficult either, and will give you additional (and sometimes unique) rewards like Hero Equipment, Strategic Resources, Units, or even Notables. For instance, one of the Consortium Parley quests can give you a Notable that will give all of your units +2 Movement speed on the map if you assign her to the Council, easily one of the most useful Notables in the game I've found so far. If they give you a quest you don't want to finish, you can always Bribe the Village afterwards to cancel the quest.

When you settle a Territory that contains a Pacified Village, you gain the ability to spend Influence to Assimilate that Minor Faction into your Empire by giving it a Protectorate status. These can be managed in the Protectorate menu (Default shortcut key is ' ; '). You only have a single Protectorate slot to begin with, but this can be increased by certain Technologies and Deeds, up to a total of 5 slots:

• Deed: Bringer of Peace - be the first to Pacify 10 Villages. Can only be achieved by 1 Empire per game.
  
• Era 2 Technology: Foreign Affairs.
  
• Era 3 Technology: Statecraft.
  
• Era 4 Technology: Dignitary Goodwill.

Assimilating a Minor Faction into a Protectorate slot will allow you to:

1) receive an Empire-wide perk that will scale in effectiveness based on how many of that Minor Faction's Pacified Villages are in your Territories.
2) produce their Units in your Cities.
3) grow their Population in your Cities.
4) unlock a Notable figure to use on your Council and/or assign as a Companion to one of your Heroes.
5) have an increased chance of recruiting a Hero from that Minor Faction during Hero drafts.

The Assimilation bonus is by far the most considerable factor when choosing which Minor Faction to place under a Protectorate, as they have the largest effect on the game. Since the perk scales in effectiveness based on the amount of Pacified Villages you control, it is important to plan your expansion by settling Territories containing Villages of Minor Factions you are interested in Assimilating. Kin of Sheredyn can use the Xavius' Fortification bonus perk to unlock their unique Empire actions (and Chosen slots) earlier. Necrophage, forever fighting, can greatly benefit from the combat-oriented factions like the Blackhammers' Damage bonus or the increased Unit Health of the Foundlings (a particularly nice synergy, as the Foundling Unit also heals adjacent friendly Units when attacking in combat so your Necrophages can fight for longer). Ametrine give a Industry boost that is useful to almost every Empire.

You can revoke Assimilation at any time if you find a Minor Faction later on with a perk you are more inclined towards, but you will be locked out of Assimilating the revoked Minor Faction again for a few turns. If you are using their Notable as a Councilor or Hero Companion, the Notable will also become unavailable and will be removed from those slots.

The Assimilation perks are broken down into two parts: a flat bonus that does not scale, and a perk that will scale with the number of the Minor Faction's Pacified Villages you control. For the total, it would be Flat Perk + (Scaling Perk * # of Pacified Villages).

Assimilating a Minor Faction will also allow you to produce their Units in your Cities' Unit production menu. You may wish to Assimilate a Minor Faction that complements your Empire's roster. For instance, if you can't produce a Flying unit, you may want to Assimilate the Noquensii or Oneiroi, since Flying units are useful for navigating battlefields. The Foundlings' Occultist Unit is a competent healer for Empires lacking good support Units. Oneiroi and Green Scions have the only Swarm Units, Flying Units which deal bonus damage to Juggernauts and are immune to attacks of opportunity in combat (attacks that automatically trigger against you if you try and move out of range of a adjacent enemy Unit in a fight). Hydracorn Charges are swift battle units that pack a punch due to their attacks ignoring all Defense.

Keep in mind that in EL2, Units also follow a rock, paper, scissors methodology. Ranged units have an innate 20% Damage bonus to Flying Units; Flying Units have an innate bonus 20% Damage to Infantry Units; and Infantry Units have an innate 20% Damage bonus to Ranged Units. Juggernauts do 20% more damage to Infantry and take 20% more Damage from Swarm Units; Cavalry also do bonus 20% damage to Infantry. Thus it's best to diversify your roster, as running something like an Infantry-only Army will leave you vulnerable to 3 Unit types (Flying, Juggernaut, & Cavalry), and you will only do bonus damage to Ranged Units.

This is a table of Minor Faction Units and their base stats. I haven't found a way to view base Production cost yet, they were all coming up with the 'infinity' icon.

For those of you interested in what the Skills do for each Unit:

Assimilation also allows you to grow the Population of a Minor Faction in your Cities by clicking the Population dropdown menu in the top middle of the City's screen. These perks will also get more effective if you manage to grow 15 of the Population across your Empire. Each Population unit of a Minor Faction gives a different bonus--the Xavius, for instance, give +3 Approval per Xavius Population in a City, increasing to +5 Approval per Xavius if you have 15 or more Xavius in your Empire.

The perk per unit of Population is as follows:

Additionally, as you grow more of the Minor Faction's Population in your Empire, you will unlock further perks with them--called Population Scale Bonuses--at 5, 15, and 30 Population. 5 Population will unlock a unique Improvement you can build in your Cities. 15 will increase the Population bonus of the Minor Faction. 30 will give large bonuses to all your entire Cities containing Population of that Minor Faction. You can view these on the right-hand side of your Empire Summary screen (shortcut 'X').

So far I've found that as long as you have 1 of that Minor Faction's Population in your Empire, you can continue to grow more even if they're not Assimilated any more. They only need to be Assimilated in order to obtain the first Population, but once you have 1, you can use that Protectorate slot to rotate through Minor Factions and collect all the unique Improvements.

This is the list of the Minor Factions and their Population Scale Bonuses. NOTE: The Hydracorn building can only be built ONCE PER EMPIRE.

Each Minor Faction also comes with a Notable figure once you Assimilate them.

Notables are characters you can assign to your Council, and as a Companion to one of your Heroes. Council seats open up with every Monsoon, up to a total of 4. Outside of Monsoons, you can pay Dust to edit your Council seats in the Empire Summary menu (Shortcut 'X').
Companions require your Hero to be level 5 and have built a Haven. Companions can be assigned when the Hero is selected in the Heroes' Circle menu (Shortcut 'N').

If you are using a Minor Faction Notable, they will 'die' (become unavailable) if you Revoke Assimilation of that Minor Faction. Your Hero will get a heartbroken status and need to wait 4-5 turns before you can select a new Companion for them. Notables will also be removed from your Council if you revoke their Minor Faction's Assimilation, and you'll likely have to pay Dust to unlock your Council to replace them.

For now, all Minor Faction Notables give the same Councilor feat, but I'll include them in the table anyways since I suspect this may change later in Early Access and my table will already be set up for easier editing.