Library Folders in Lightning Experience and Classic UI

Creating Folders in Lightning Experience
To start using Library Folders in Salesforce Lightning Experience:

1. Navigate to the Files Tab in Lightning Experience.
2. From the left-hand menu, select the Library where you want to create a folder.
3. Inside the library, click the New Folder button.
4. In the dialog that appears, enter the desired Folder Name and click Save.
5. A confirmation message appears: "Folder [name] was created."

Prerequisite — Required Permissions: If the New Folder button is not available, ensure the user meets both of the following requirements:

• The user is a member of the library.
• The user is assigned a Library Permission definition that includes either the "Manage Library" permission or the "Organize File and Content Folder" permission.

For more details, see Create Libraries and Create and Edit Library Permissions.
Uploading Files to a Folder
Opening a Library or its folder from the Files Tab in Lightning Experience and clicking the Upload File button adds the file to the current library or folder. To move a file that was uploaded via the Files Tab, users must first publish the file or content into the Library Folder that contains the desired subfolder.
Limitations Introduced Before Summer '18
Before the Summer '18 release, it was not possible to manage Libraries or share files with Libraries in Lightning Experience. Users had to publish files into the desired library folder. See Files and Content: What's Different or Not Available in Lightning Experience and Share Files with Libraries in Salesforce Classic for more details.
Moving Files — Viewing Context Matters
To see the Move option in the action picker for a file, users must navigate to and view the file from within its corresponding Library in the Files Tab.
Example: If a file has been published to Library A, the Move option in the action picker is not visible when viewing the file from "Owned by Me", "Shared with Me", "Recent", or "Following" views. However, navigating to the Libraries view and selecting Library A where the file is published makes the Move option visible.
Asset Library Limitation
It is not possible to add Folders to the standard Asset Library. The Asset folder always appears at the top of the list when sorting folders in the Libraries view by clicking the "NAME" or "LAST ACTIVITY" column headers.
Sorting Limitations
It is not possible to sort the contents of every library or folder by clicking the "TITLE" or "LAST MODIFIED DATE" column headers. Some users may be able to sort contents of specific folders or libraries but not others. Sorting is not available in newly created libraries or existing libraries subsequently enabled to use folders, as outlined in the Create Folders in Libraries in Lightning Experience documentation.
Currently, there is no way for customers or Salesforce Support to disable folders for libraries to re-enable sorting. To request this functionality, consider creating or promoting an Idea on IdeaExchange.
Limitations in Salesforce Classic
The following limitations apply to Library Folders when accessed from Salesforce Classic:

• It is not possible to create, edit, or delete Folders in Classic. All folder management must be done from the Lightning Experience Files Tab.
• Subfolders or folders created within Libraries are not visible when viewing the Library via the Libraries or Content Tabs in Classic.
• It is only possible to upload files into a Library folder by contributing content to the corresponding library in Classic.