Yes you can. You can set up as many folders as you want. I've got Fiction, Non Fiction, Free Books, Recipes, Read Books, etc. On my kindle you have to press the button with lots of lines on it (if you know what I mean) then go on "Create New Collection" If you read the Kindle help guide it will tell you how to do it on your kindle.
I'm loving my kindle so much that I have one, my husband has one and my mum has one. Only problem is that all three are on my amazon account! As such, I've got a lot of books, some I would like to remove as I've read them but don't want to delete in case the others haven't read them. Is there a way to set up folders so I know what I have left to read? Many TIA.