It seems that this is still a thing. I thought we've been through folders at the beginning of SharePoint 2010. I thought we were done with them. They were gone. Forever. For good. Never coming back. But I was so, so, so wrong. That's way I'm writing this blog: Don't use folders! They suck. And here's why:
1. Usability
Let's say: I'm creating a document library with 10 folders, also some folders nested within them. And I just tell you "Search for all files in the folder 'Betatest'". You have no idea where this folder is. Have fun clicking through all the folders and subfolders just to find that one folder. Wouldn't it be smarter to use Managed Meta Data Navigation? Yes it would be smarter, because you don't need a refresh everytime you switch a tag. You can first check every tag available and then choose to click on the right one. You still have to search, but you will be much faster. Oh, btw.: You can sort or filter while using meta data. Ever tried this with folders?
2. URL length
This is still a thing and it will still be a thing in the next years. Folders are a part of the URL and the limitation still sucks. Sometimes you simply can't have folder names that are long enough to explain the content. So maybe, just saying, you should use meta data or content types? You should.
3. File URL
Ever created a folder structure and realized you have a typo somewhere? But the link is already sent to everyone who needs to work with it? Well. If you would have used meta data, you would have been able to simply change the meta tag and be done with it.
Or have you tried to move files around? Everytime you have to move them to a different folder, the URL will also change. If you would only change the meta tags, the URL would stay the same.
4. Different views for different users
This is a great thing: Every user could create a view which only displays the data he/she needs. Won't work with folders.
5. Data integrity & duplication
If you allow users to create folders, in the end, they can have a lot of funny names. I found folders named "sharepoint", "Sharepoint", "sharePoint" and "SharePoint". Why not create a meta tag for this and everyone will get it right? Why give users a change for spelling errors? And the other thing about those four folders was: Guess what I found there. Just guess.
Yes, the same damn files, just different timestamps. Well done folders, well done.
6. Why SharePoint and not a file system?
Let's face it: You can have folders on any server, any file system, anywhere. Why spend so much money on SharePoint instead a cheap file system? You will have the same problems with folders on a file system, that's why SharePoint offers meta data. It's so much better than folders, otherwise you are just burning cash.
7. Permissions
I got this a lot. "We can set permissions on a folder and every file in there will have the same permissions. It's super easy and fast!" It is. Until your users are copying the files to different folders. The permission will change, they might loose the file or the wrong people work on the files. If you are using meta tags you might set permission on item level, but they will stay the same as long as they are in this library. Changing a meta tag won't change the permission! Or you just start using a couple of libraries and start setting permissions on library level instead on file level. Anyway: To keep track of every permission set on folders in huge libraries you would have to write a lot of documentation. And trying to keep up with changes might be really hard.
tl;dr:
Meta tags rocks. Easy, fast and well-arranged. Shorter, consistent URL. They rock.
Don't use folders. Never.