Yes, you can set up as many groups into your contact list as you wish. You can have as many contacts in any group. And any contact can be in no group, one group or a combination of groups.
Important: Keep in mind that Active, Hot Lead, Prospect and Inactive are not groups of clients, but their status. You can have clients with different statuses belonging to different groups.
That being said, to create a group, from the CONTACTS TAB click on the "Manage groups" icon in the lower left corner of your screen (the icon with the group of people), name the group and click on the "ADD GROUP" button.
To add a contact to a group, go to the CONTACTS TAB and click on the contact's name. From the PROFILE TAB, scroll down to the "Group Information" section, check the group(s) and save.