The checkboxes below the description field on the New Collections dialog, control the organization of the collection.

Checking the Sort Fonts into Alphabetical Folders checkbox will create folders named A, Z to contain the fonts. Only those folders needed to hold the fonts will be created. If you have no fonts in the collection that start with the letter J, there will be no J folder in your collection. Font names that do not begin with a letter, such numbers or punctuation will be placed in a folder named #.

Checking the Make Separate Folder for Each Family checkbox will create a new folder for each font family. The folder will be named by the font family name that is extracted from the file. There are some exceptions to this rule. See the Preferences section for details. If you have selected both Alphabetical folders and Family folders, the family folders will be inside the alpha folders.

You can also optionally add all of the fonts currently installed in your Windows/Fonts folder to the new collection. Check the Automatically Add System Fonts to Collection box to do this. Since this is not something that you would probably not want to do for all collections, this option is disabled, by default.