WordPress-How to create a Taxonomy?

Here is an example of registering a “people” taxonomy

function people_init() {
   // create a new taxonomy
   register_taxonomy (
   'people',
   'post',
         array(

'label' => _('people'),
'rewrite' => array('slug' => 'person'),
'capabilities' => array(
'assign_terms' => 'edit_guides',
'edit_terms' => 'publish_guides',
)
 )
);
}
add_action('init', 'people_init');

Here is an example of adding the term John to post id number 555 in the "person" taxonomy

wp_set_object_terms(555, 'John', 'person');