If you’re a peaceful player look at which resource you need the most and build it on that type of island if there is one close, for a peaceful player that trades a lot it can be a good idea to spread your villages out a bit to cover larger areas with your trade offices, but there are also minuses in doing this like lots of time spent on moving troops and resources around. For aggressive players I think settling the closest wine island is definitely the way to go.

To found the actual city you need 40 idle citizens, 9000 gold and 1250 wood. I suggest sending max resources with extra ships too, so you can start building up your new city right away, that is 1500 of each type. Before you get a governor’s residence built there will be corruption, so I suggest using all your citizens there for taxes until you get the governor’s residence built up.